S5fc7 



Problem 21 F 

American Bookkeeping Series 



Bookkeeping 

and Cost Accounting for 

the Farm 



by -^ 

Lloyd E. Goodyear 



Autliur of Priiioij»los. Rules and Definitions for Hoolvlveepinj; ; (xoody ear's Rank 

Accounting; (Joodyear's Cost Accounting; (ioodyear's Retail Accounting; 

(Jood.\ ear's Wholi'sale Acc.)untin,i: ; (Joodyear's Implement and (Jrain 

Accountiiii; : (Joodyear's Secretarial Accounting; (Joodyear's 

Corporation Accounting: (Joodyear's Wood and Metal 

Manufacturers' Accounting; (Joodyear's 

Departmental Accounting. 

Joint Author of Callison & Goodyear's Automobile 

Accounting; S. H. & L. E. (ioodyear's 

Real Estate Accounting, 

and <»tlier systems. 



&-20 



Copyrighted 1920 by 

(;()Or>YEAR MARSIIAEE ITRLISTTTXC COMPANY 

Cedar Rixi>ids, Iowa 

Monograph 



FOREWORD 

The aim of this problem is instruction in the essential features of 
a general bookkeeping and cost keeping system for the farm. 

It is thought that the record plan is simple enough and compre- 
hensive enough to be mastered for practical purposes by many, after 
writing about forty illustrative entries, model forms, and explanations 
accompanying them. 

In order to be assured of correct costs, a certain program of entry 
must be followed, otherwise some important item may be overlooked 
or some obscure item may not be seen. 

It is necessary to have a system, and system implies an orderly 
arrangement of details. One cannot simplify bookkeeping by ignor- 
ing troublesome items unless he is satisfied with uncertain results. 

This problem has been made as easy as possible for the conscien- 
tious student to master. The main purpose, however, is a record plan 
that is not only easy to learn, but easy to operate in actual use. 
Speedy record and satisfactory reference involve the use of some 
special forms with which the student is asked to accustom himself as 
he proceeds. 

The main books are a cash journal and a ledger. These are sup- 
plemented by several pocket record forms illustrated through the 
problem of this pamphlet. The bank check book has attention. 

The writer of this problem has availed himself of the suggestions 
and comments contained in communications with farm managers and 
instructors, many of whom have made use of his former course en- 
titled "Farm Accounting," copyrighted in 1911. Since that time the 
development of the double-double entry principle in accounting has 
smoothed the rough edges of bookkeeping for businesses of great 
diversity of operation, among which farming is foremost. 

Hence bookkeeping is now easier to learn and easier to use than 
was thought possible ten years ago. 

The student who will take time to thoroughly master the points 
which may seem novel to him will soon see that the whole matter can 
be covered in very short order. 

His ability to compute farm costs in a reliable way will give him 
an advantage rather unusual at the present time. 

©CI, A 5 761 7^ ™^ AUTHOR. 

m 26 ,j.j - 






PART ONE— OPENING THE ACCOUNT BOOKS 
PROPERTY 

The value ol" property is tlie basis ol" bookkeejjing i-ecord. 

The property should be listed according to kind (further ex- 
plained later), and the value of each kind should be given. Since 
value is the important thing to you in your future caleulations. you 
should make note of a few rules for fixing Book Value (the value 
written in your books) in a uniform way, which should always be fol- 
lowed. 

"I>ook value" is the cost of buying, nuiking, or growing the thing 
entered in the books. When the cost cannot be found, the book value 
may be an estimate or fair valuation on personal property as it stands 
on the farm. If marketable goods — the cost of selling and delivery to 
market is to be deducted from market price. If real estate — the book 
value may be a fair valuation of the land and buildings on March 1, 
11)1;^ (U. S. Internal revenue ruling), if the property was obtained 
pi-ior to that date and records have not been kept. 

Special Comment. The ideal time to open a set of books is Avhen- 
ever you can place a correct valuation on all property owned. This 
is usually after harvest and before planting. The value placed on 
property at the Lime of the last income tax return is the basis for a 
starting point in order that the next annual income tax return will 
reflect the actual gains of the intervening year. 

It is assumed, howevei', that the system of bookkeeping previously 
used by you Avas not such as to shoAV the exact cost of any product, 
hence it will be impossible to start with ascertained cost. But note 
this point, that whatever valuation may be placed on property at 
starting, if the books are kept according to the rules thereafter, the 
accounts will right themselves and be on an accurate basis as soon as 
the goods on hand at starting have been sold. Whatever over valua- 
tion has been placed on i)r<)perty at the start will eventually come out 
\n the accounts as less gain, aiul whatever under valuation has been 
placed on pi-operty at the start will come out iu the accounts as more 
gain. It is evident then, that the first valuation siiould be as nearly 
as possible on the basis of cost of buying or cost of producing. 

Aside from the difiKcult\- of making a correct list and valuation of 
])roperty on hand, one time is as good for opening a set of books as 
another, and for practical purposes, the time to commence bookkeep- 
ing is whenever one has the plan of accounts in mind. 

3 



The properties are divided into groups according to kind ; and an 
account is kept of each group. The purpose of the account of prop- 
erty is to show with reference to any one kind, the cost o*f it, the ex- 
penses or losses pertaining to it, and the income or gain derived from 
it. Generally speaking, the different kinds of property on all farms 
may all be divided into the same groups, and will have the same ac- 
counts in one set of farm books as in another. But it is assumed that 
each farm manager is likely to push certain kinds of farming differ- 
ently from the general run, and to that extent he will need different 
accounts. Thus while one farm manager may consider one single ac- 
count of ''Hogs" all that is necessary to show the cost of all hogs and 
the gain therefrom, another might want to separate this class of prop- 
erty into two or more groups according to breed, feed, and care, or 
use made of them in order to show the cost and profit of each group ; 
or he might find it to his advantage to keep a separate account of one 
single animal. In the present system of bookkeeping, you can divide 
your property into as many and as small groups as you like, and find 
with equal facility the cost, loss, and gain of each. 

In the following directions for keeping the books, the instructions 
for opening the accounts are intended to illustrate how the ordinary 
accounts may be kept, and how additional accounts other than those 
given in the illustrations may be opened and kept when it is desirable 
to have additional accounts. 

Directions. It is presumed that you are now preparing to open 
your farm books and these instructions are given to explain and pic- 
ture each step of opening. The intention is that you write in the 
small practice blank books every item referred to, and compare your 
written work with the models. These directions are given to guide 
you in doing so. While all points of record are considered, several 
common items of the property are left out for the sake of brevity. 

Refer to the property list, inside cover of the practice journal. 
Tliis list is to be copied as the opening entry for the problem to be 
Avritten. It consists of an enumeration of things owned with their 
cost (known or estimated) in the amounts of the first money column, 
also an enumeration of debts in the second money column, together 
with tlu^ wealth balance, or difference between total property and debt. 

Write the heading "Property List of E. A. Atkinson, March 1, 
1920" at top of the opposite page and copy the items thereunder, 
after reading the explanations referring to each in the folloAving para- 
graphs, which are to serve as reminders in opening any set of farm 
books as well as in writing the particular items included in this 
])roblem. 

4 



UKMAUK. If you aiv not afciistouiod to writinj^ on two-cohunn journal 
paper, write this oxeivise lirst on a loose sheet ruled like the flrst page of the 
cash journal. As soon as this work is found to be correct, copy it in the book. 

1. Cash. Loose money sliould be counted and the amount of 
money in the bank should be ascertained. Assuming that this has 
been done, and that the amount is as shown in the model property list, 
copy on first and second lines of the two-column paper under the 
h"adiiig already written. 

2. Bank Checking Account. Ascertain your balance in the bank. 
This will be entered as in the model form. 

:]. Bank Savings Account, and any other cash funds you may 
have. List tlie uames and amounts as above, (none in this problem). 

4. U. S. Bonds. Enter each bond separately, giving description 
and par value. See form. 

Other bonds in the same manner, (none in this problem). 

5. Stocks. Enter and describe each stock certificate that you 
hold. Stock certificates are entered at cost, (not par value as in 
bonds), because stocks are simply shares in the capital of some con- 
cern which may be worth more or less, while bonds are agreements to 
pay you a certain amount with interest. See model form. 

6. Life Insurance. If you have a limited payment life insurance 
l^olicy or endowment policy, it is worth the paid-in reserve. This is 
likely to be shown in the "cash surrender value" clause printed in 
the policy. Enter as shown in model. 

7. Notes Receivable. Enter each note showing payer, when due, 
and face. Scc^ form. 

8. Accounts Receivable. If persons owe you on open account, 
write name ami address of each i)ei'son and the amount owed. 

!). Property for Sale or Consumption. This may consist of many 
things under different headings. The items should specify "Cost" if 
entered at the actual ascertained cost, or "Est." when entered at an 
estimated value. Be conservative in estimating value. Your income 
figures will be based on the values at starting as before said. The 
following will illustrate : 

(a) Produce. This consists of Wheat, Oats. Corn. Hay, Potatoes, 
and other grown products now in store. List each separately. Corn 
and hay are illustrated in the model form. A number of small un- 
important things can be lumped as "Miscellaneous Produce." 

(b) Growing stock, illustrated by 

Hogs, which enter at value, hundred weight basis. (See modeH. 
Other items include Sheep, Growing Cattle, etc., (not considered 
in this problem). 

5 



10. Income Bearing Stock, illustrated by: 

(a) Dairy Cattle. Enter each separately and give value, if prac- 
ticable. (None at opening of this problem.) 

(b) Other Stock or Poultry. Enter at bulk value or separately, 
according to importance. (None in this problem.) 

11. Property Kept for Operative Use or Service, illustrated by: 

(a) AVork Horses and Horse Machinery. List each item, with 
its cost, or present value if the worse for wear. It is an excellent plan 
to place numbers on farm machinery and household furniture so as to 
know them on the books by number. Anything that will help one to 
a quick reference as to cost of property of a permanent nature will 
more than pay its way in the ease with which records are kept after 
they are once started. 

(b) Automobiles and Tractors. List separately. Hand power 
or motor power machinery list separately. (None in this problem.) 

(c) Household Furniture. List as in machinery. The number- 
ing plan is good, otherwise one will forget the cost. (None in this 
problem.) 

(d) Other Property. If the possessor of patent rights, copy- 
rights, or other things of value, an account giving the description of 
same and its value should be opened. (None in this problem.) 

12. Real Property. A separate account should be kept with each 
separate piece or parcel; for example, each farm operated separately, 
each piece of land owned as an investment or speculation, each sep- 
arate renting property. The heading should give description of the 
property and the value of buildings should be entered as separate 
items from the land. See form. 

REMARK. Real property refers to laud, buildings, and permanent im- 
provements on the land as compared with personal property ; i. e., things that 
may be moved, carried, or conveyed about. 

After you have entered all property that you own at as carefully 
found value as possible, add the list and leave totals in pencil just be- 
low the last item, as in the form. 

DEBT LIST 

The debts will be entered in the right column in the same way 
that property was listed in the left column. 

13.* Notes Payable. Enter each note, giving name of payee, date 
due, and amount. See model form. 

14. Mortgages Payable. See model form. 

15. Accounts Payable. Enter names and amounts of persons 
whom you owe. See form. 



16. Other Debts. Enter any amounts owing to anyone (none in 
this problem). 

After debts are entered, total them as you did the property. 

WEALTH 

Find the difference between total property and total debt. This 
difference, or balance, is the amount of your wealth at this time. Place 
t!iis amount under the debt total, after which rule and total both col- 
iiinns equally. 

Problem Directions. For the purpose of this problem, the model 
property list wliieli you have copied is to be considered the opening 
record of the bookkeeping system now to be developed. 

THE LEDGER 

The list of property, debt, and wealth balance, or "statement of 
condition" as it is commonly called, is now to be recorded in the 
ledsrer. Each kind of property or debt will be given a separate ac- 
count. The purpose of account division of the total wealth is to make 
a place for each appreciable part, where there will be constantly be- 
fore you the figures showing whatever of value owned or owed and 
whatever of loss or gain there is connected with it. This exhibit is 
made on the four columns of the "double-double" ledger. 

Problem Directions. In this problem, the accounts will be con- 
densed in as small space as practicable by using the small practice 
ledger. Preparatory to opening the ledger accounts, write the ac- 
count names on the left side pages opposite the model printed account 
names on the right side pages. Where account names are written 
below the top. rule double head lines across the page as in model. It 
should be understood that if a loose leaf ledger were used, each ac- 
count of a permanent character would have a separate numbered leaf, 
and the numbers skipped are for the insertion of account leaves to be 
opt'iu'd ill th<' future. 

The Accounts. The name of the account is written at the top. 
The account name is descriptive or indicative of (a) some part of one's 
property as "Cash," "Corn," "Work Horses," "John Smith" 
(meaning our right to collect money from Joiin Smith), "Notes Re- 
ceivable," etc.; (b) some parts of one's debts as "Notes Payable" 
(notes that one is obligated to pay to others), "Henry Jones" (mean- 
ing one's obligation to pay money to Henry Jones), etc.; (c) some 
kind of loss that is connected with the business as a whole and is not 
associated with any one part of the business, as "Business Expense"; 
and (d) some kind of gain that is not connected with anj' one part of 



the business, of which an example is "Income from salary or wages." 
(See account names in model ledger.) 

The date of an entry in the ledger is placed to the left side, fol- 
lowed by the memoranda, and that by a column headed P. M. (post 
mark), referring to the leaf number or page of the journal from which 
the item was posted. 

The use of the four columns in the ledger accounts may be thus 
briefly described and illustrated. 

Referring to Property Accounts. Turning, for example, to model 
account No. 40, headed "Corn," on page 7 of your ledger, we 
have a property account. It originates in column A (property ob- 
tained column), where the first entry shows that corn on hand (re- 
garded as obtained at the time of opening the books) amounts to 950 
bushels at an estimated cost to raise of $1.25, making the total book 
value $1,150. All property accounts originate in column A — the 
"property obtained" column. An entry on March 5 shows the sale 
of 100 bushels at $1.40, amounting to $140. The entry for the cost of 
the corn sold is made in column B (property reduced). In an entry 
of property reduced, the amount is always at the same value as was 
previously entered when the property was obtained ; that is, property 
reduced is always entered in column B at book value. The difference 
between book value and proceeds of sale, in this case $15, is entered 
in the gain column. 

Later on is an entry in the loss column showing the loss or expense 
of marketing the corn sold. The account illustrations are not all of 
them complete, but all entries illustrated are exactly the same as you 
are expected to write. 

This account will serve to illustrate the entries for all property 
accounts as kept by double-double entry, namely : 

Col. A shows the cost of the property obtained. 

Col. B shows the cost of the property reduced. 

Col. C shows the loss connected with the property. 

Col. D shows the gain connected with the property. 

Col. A — Col. B=the cost of the property remaining. 

Col D — Col. C=the net gain on the property; or, 

Col. C — Col. D=the net loss connected with the property. 

The above covers the essential features of the "double-double" 
entry property account. 

NOTE. Debt accounts, exclusive Loss and exclusive Gain accounts will be 
explained in like manner when the first account of each kind is taken up. thu-. 
eompletinff the four kinds of accounts. 

LOOSE LEAF SYSTEM. Practically all of the accounts, except accounts 
with persons, are expected to continue year after year indefinitely, so that open- 
ing the accounts is making a permanent record. When a loose leaf ledger is 



used, the account loaves are to be written on tlie side up wlien tlie paper lies to 
the left of the liindiiif; rin;:s. or near the journal. When one side of an account 
leaf is tilled, the account leaf is turned, or reversed, by bindinj; at the opposite 
end of the leaf. By this means the side of any leaf in use is always up while 
close to the journal. When any account leaf "No. 1" is filled on both sides, the 
account is continued on another leaf which bears the same account number, but 
is "leaf No. 2." Thus the same account may continue through leaves Nos. 
3, 4. 5, etc. Your practice led;;er. thoujih a bound book for convenience in work- 
in>; this problem, will have accounts luunbered on the loose leaf plan. 

Directions. In the property list which you took, the values of all 
property tiiat you now own is to be entered in column "A" of their 
respective accounts. In order to associate "A" with property value, 
write "A" at the top of the first column of your property list, and 
write "H," which stands for debt accounts, at the top of the second 
column of your list. (This list is also your "financial statement," 
"statement of condition," or "opening entry" of your journal, which- 
ever one cares to call it). Now post the "A" items of your list to the 
"A" column of the ledger accounts, as the model list is posted to the 
model accounts. 

If you have not already done so, write the account name "Cash" 
at the top of account No. 1. The page of your practice journal will 
he the same as is used for the model entries- printed opposite. 
Then on the first writing line of the account, write under "date," the 
date of the list, (do not forget the year at the top) ; under "memo- 
randa," amount on hand and in bank; under "P. M." (post mark 
column), write the journal leaf number "1," and in money column 
"A," the amount. When you have posted this item, write before 
the amount in the journal (the list in this case) the account number 
and a cheek mark (V). The check mark in the journal means that 
the item is posted. See model journal and model ledger account. 

When an account is opened it should be indexed. Indexing will 
be omitted in this problem, since the account names and numbers have 
been in-iuted on the front cover, which you may use as an index. 

Plan of Accounts. The plan of accounts refers lo the account 
sulxlivisions adoi)ted, and tlie order in which they appear in the 
ledger. We here use the same order that would be adopted if an 
accountant had drawn them off in a statement. This order has al- 
I'eady been observed in the list, journal leaf "1." It can be followed 
in a loose-leaf ledger, but not in a bound ledger; for when new ac- 
counts will be opened sheets can be inserted at any place in a loose- 
leaf ledger, while in a bound ledger this is impossible. 

Account numbers ()-!)!) are reserved foi* accounts of property, the 
■"A" list. Tile accounts of propei-ly are subdivided further: 

Nos. ()-:}!) — Cash and casli items (notes, slocks, bonds, accounts 
receivable). 

I) 



Xos. 40-59 — Produce and growing crops. 

Nos. 60-79 — Growing stock. 

Nos. 80-89 — Stock or other property kept for direct i»ncome. 

Nos. 90-99 — Labor, work stock, machinery, and farm land, the ex- 
penses of which are distributed to cost of products. 

Account numbers 100-199 are reserved for accounts of debt, the 
" B " list. The accounts of debt, and a few general expense or income 
accounts placed in the same section, are subdivided further : 

Nos. 100-109 — Notes and mortgages payable. 

Nos. 110 forward — Accounts payable. 

Nos. 199 backward — General income or expense accounts. 

Account No. 200 is reserved for the account of the wealth balance. 

NOTE. Accoimts of loss or gain, the "C" and "D" lists, aiitomaticallj- fol- 
low the "A" and "B" lists and need very little further attention except as to 
some three or four accounts of a general nature. 

Accounts are placed as nearly as may be in statement order, with 
skipped unused numbers for the insertion of leaves for new accounts 
in sub-group order which may be opened from time to time. 

NOTE. This arrangement is permanent and satisfactory with dne possible 
exception, which will- never come up on the ordinary farm. If accoimts to be 
collected from persons exceed about forty in number, they had better be taker 
out of this ledger and placed in a separate "auxiliary" ledger. With the e.i- 
ception of i^ersonal accounts, the present ledger is large enough unless in very 
exceptional instances. 

No. 5. XJ. S. BoDds. Post, post mark journal, and index as in 
model. 

NOTE. In a loose leaf ledger, turn one leaf to left side and oi>en this 
accoinit. giving it the number 5. Do not leave any unused leaves between those 
that are opened. If in future an account should go between used leaves, it can 
be inserted. 

The memoranda in ledger should be complete. See model. War 
Savings Stamps can be placed in the same account ; or if you are buy- 
ing them regularly, better give them another leaf and number. 

No. 6. Stocks. Give stock shares number 6. See model. Post 
and post mark. 

No. 7. Life Insurance Policy. Give each policy a separate ac- 
count and, of course, a separate account number. Post as in model. 

No. 8. Notes Receivable. Each note should be recorded sep- 
arately in the same account showing payer, date due, and amount, with 
any other point of information as interest rate, etc., if you think ad- 
visable. See model. 

Nos. 10 to 39. Accounts Receivable. Give each account a leaf 
number, or if it is likely to contain only a few entries, place several on 
the same leaf and give them the same leaf number. 

10 



NOTE. If the lux'ounts with several persons contain only one item to be 
paid all at once, as some fee for services, or the like, have all such on one 
account leaf headed "Sundry Accounts Receivable," and sive each man's name 
and amount one line, writinjj the name in the memoranda space, as you did iu 
the case of notes receivable. 

Nos. 40 to 59. Produce. Keep an account of each kind that is 
of sullicicnt importance to occasion separate in(|uiry as to its cost or 
value and the loss or gain connected with it ; for example, corn, oats, 
wheat, potatoes, and lump minor items in "ISIisceHaneous Produce,'" 
giving each division a separate leaf and number, using numbers from 
40 to 59, inclusive. See model accounts Nos. 40 and 41. Post to your 
ledger as there shown. 

Nos. 60 to 79. Growing- Stock. Wc allow twenty numbers for 
growing stock. This may or may not be enough. However, there are 
plenty of other leaves. On a large diversified farm, account Nos. 1] 
to 39 may be brought into this section by putting accounts receivable 
into a separate book. The idea is to separate these divisions so that 
all under one division will occupy one section of leaves. 

The growing stock accounts are intended for a record of the cost 
and loss or gain connected with any particular group on which figures 
are wanted. This may be a pen of fattening steers or a single animal. 
Exclude from growing stock such stock as is maintained for use or 
service, such as work horses and milch cows, which come under the 
same rules as machinery. 

Account No. 60 illustrates all hogs grouped together. Post as in 
model. 

Income Stock. Accounts Nos. 80 to 89 are kept for stock that is 
maintained for the direct income derived therefrom. Account No. 80, 
"Dairy Cows," is an example. 

Accounts Contributing to Farm Operations, These are given the 
section numbers 90 to 99. They consist of the group of accounts that 
involve losses which by routine entry are to be apportioned to farm 
l)i'0(lucts. or farm maintenance. 

Kl-MAUK. The model forms of accounts Nos. {)! and 9!) do not contain 
all items uliicli should be made by the student. Later on it will be seen that a 
nundier of the student's entries are not illustrated in the mode] accounts. 

DEBT ACCOUNTS 

The debt accounts are given numbers 100 up to 199. They siiow 
amounts to be paid to others. 

Comment on Debt Accounts. Turning, for example, to account 
No. 100, "Notes Payable," we have a debt account. It originates in 
column B (debt incurred), where tiie entries on March 1, first and 
second lines, describe two notes, as to whom payable and date due, 

11 



witli amounts in column B. On March 14 is an entry showing that 
the note due on that date was paid. The face of the note is entered 
in column A to cancel the previous entry in column B. It is further 
seen in column C that the payment of the note included $4.58 interest 
(a loss). This will serve to illustrate the entries for all debt accounts 
as kept by double-double entry, namely: 

Column B shows amounts of debt incurred. 

Column A shows amounts of debt reduced. 

Column C shows loss connected with the class of debts named in 
the account heading. 

Column D might show any gain — very unlikely — unless one were 
to make a compromise settlement. 

Column B less Column A = amount of debt remaining. 

Column C less Column D = the loss connected therewith, usually 
interest on notes payable, but possibly fees and expenses of obtaining 
loans. 

No. 100, Notes Payable. Post as shown in model. 

No. 101. Mortgage Payable. Entered as notes payable. Each 
mortgage should have an account by itself, as there will be many in- 
terest payments to record. 

Nos. 110 to 199. Accounts Payable. See accounts receivable for 
general arrangement. Post as shown in models. 

WEALTH 

No. 200, Wealth Balance, This account is a summary of the 
whole. It shows (1) the amount of the owner's interest or equity in 
the entire concern on the date of opening, and (2) the revision in the 
net Avealth once a month. It may be thought that it is unnecessary to 
show net wealth more than once a year as in ordinary bookkeeping. 
But the "double-double" system discloses change in net wealth by 
routiviC entry once a month. When the figures of one's net wealth 
come up automatically, there is every reason to take a line in the ac- 
count to set them down. In fact, it is a good idea to see w^here one 
stands once a month, even in farming, if the exhibit involves no ap- 
preciable extra labor. 

NOTE. The net wealth balance is placed in the "B" column along with 
debt amounts. This is not because net wealth is regarded as a debt. It is 
simply the summing up of all property less debt, and the amount goes in the 
debt side to show by how mucli the property exceeds the debt. If one's debt 
exceeded his property, the balance in this account would he placed in the "A" 
column and the name of the account would he changed to "Insolvency Balance." 

REMARK. All ledger accounts should be indexed. In the present pre- 
pared problem, the index to the accounts is printed on the cover of the ledger 
so that this part of tlie work may be omitted by tlie student. The present pur- 

12 



post' is -the mastery of the record and account plan. Atteution to the main pur- 
pose necessarily causes a number of details to be passed over with slight con- 
sideration. 

Ledger Proof. The bookkeeper's ordinary proof of posting is the 
■ trial bahmce." The trial balance is a list of all account totals in the 
"A" columns against all account totals in the "B" columns of the 
accounts. The one total should equal the other if the posting is correct. 
You have observed that the column "A" total etiualed tiie column 
"B" total in the statement. Consequently, if all are posted from the 
statement (which will be filed away as journal leaf No. 1), the journal 
"A" amounts in the ledger "A" columns and the journal "B" 
amounts in the ledger "B" columns — the ledger should balance also. 
Before trying the ledger, look through accounts that have several 
items, and place the sum under the items in pencil, red ink, or in some 
way to distinguish totals from posted figures. In the printed models, 
smaller type is used for footings. Then sum up all "A" and "B" 
amounts. If they are equal, you may consider the posting probably 
correct. If they are not equal, you may have (1) posted an "A" 
amount in a "B" column, (2) posted some amount using the wrong 
figures, or (8) failed to post soinetliing. In any case, the posting 
siioukl be reviewed and the mistake found. 

A correct trial balance of the model accounts follows: 

TRIAL BALANCE MARCH 1, 19— 

A B 

1. rash $ 352.84 

5. U. S. Bonds 1,500.00 

6. Stocks 6,010.00 

7. Life Insurance Policy 1,850.00 

8. Notes Receivable 189.89 

10. John Carmody 26.71 

11. Peter Olson 76.20 

40. Corn 1,150.00 

41. Ilay 1,484.00 

60. Hogs 427.50 

;)1. Work Horses 575.00 

!)9. Farm Real p]state 43,297.50 

10.0. Notes Payable 478.34 

101 . Mortgage Payable 8,000.00 

110. Gage Mercantile Co 167.43 

200. Net Wealth 48,293.87 



$56,939.64 $56,939.64 
13 



Comment. Opening a set of books so that the accounts reflect the 
true condition is the most difficult part of bookkeeping. You have 
done this. You have stated the financial condition. The^ other phases 
to be mastered are making the current entries and distributing the 
costs. Whenever one buys, sells, collects, pays, w^orks, vi^hen things 
grow, fires occur, lightning strikes, or any operation of man or nature 
affects the property, there is increase or decrease in the value of some 
part or parts of the total property, or, as we say, a change in financial 
condition. These changes are recorded and the amounts in dollars 
and cents of the changes are posted to the accounts. The purpose of 
current records is to narrate the operations affecting the property, and 
to indicate in the accounts the changes of value resulting therefrom. 

THE JOURNAL 

The "double-double" journal is planned for the first records and 
entries of the business operations. The entries are posted from the 
journal to the ledger accounts. The model journal illustrates the 
style to be used. One should become thoroughly familiar with the 
action of the journal he uses, as he should be v/ith any other tool he 
tries to work with. 

The month and year are written at the top of the sheet and the 
day of the month is written in a column headed "Day of Month.'' 

The space of the journal sheet to the right of the column headed 
"Check No." is the journal proper. The journal entry begins with a 
record of the particulars of the transactions written in the space 
headed "Memoranda." The date is written in the column headed 
"Day of Month." After the date column is a column in which are 
written the names of the accounts to which the amounts are to be 
posted; and after the space for account names and numbers, the 
amounts are written in the four money columns. 

These four columns correspond with the four columns of the 
ledger accounts, and any amount in the journal "A" column will be 
posted to the ledger "A" column, "B" in journal to "B" in ledger, 
and so on. 

One exception to exclusive four-column entry is to be noted. The 
cash account (a property account) is taken out of the general "A" 
and "B" columns and placed to the extreme left. This is for im- 
mediate reference to the cash account in order to see without posting 
the cash balance, which includes both money in pocket and in the 
bank. Column 1 is followed by " (A) " "cash received" or "property 
obtained" — the "A" meaning that its total will be carried to the gen- 
eral column "A" at the end of the month. Column 3 is followed by 
"(B)" "cash paid" or "property reduced" — meaning that the total 

14 



of this column belongs to the "B" column, to be carried to the general 
"B" column once a month. 

Column 2 is merely memorandum. 

In referring to entries, it appears that the time-honored book- 
keeping terms "Debit" and "Credit" will not permit as effective ex- 
planation as direct reference to columns by the names "A," "B," 
"(',■■ and "D." Those versed in bookkeeping will recognize columns 
"A" and "C" as "debit" columns, and columns "B" and "D" as 
"credit" columns. The terms used in tlie following complete scheme 
for double-double entry record are the letters designating the four 
columns. 

RULES FOR ACCOUNT ENTRY 

Rule 1 — "A" Column. On opening the books, the value (cost) 
of all property possessed at the time of opening is entered in the "A" 
column. 

After opening the books, the value of all property obtained is 
also entered in the "A" column. 

After opening the books, the amount of debt reduction (payment 
or otherwise) is placed in the "A" column. 

Briefly, after books are opened, entries in the "A" column are 
used to show 

Property obtained, or Debt reduced. 

Reason. Either propertj' obtained or debt reduced is equivalent 
to wealth increased. The "A" column in its last analysis means 
wealth increase. 

Rule 2 — "B" Column. On opening the books, the amount of debt 
is i)laced in the "B" column. 

After opening the books, any debt incurred (new debt to be paid) 
is placed in the "B" column. 

After opening the books, any reduction (sale, transfer, or loss) 
of property is placed in the "B" column. 

Briefly, after books are opened, entries in the "B" column 
signify 

Property reduced, or Debt incurred. 

Reason. Either debt incurred or property reduced is equiva- 
Icjit to wealtii decrease. The B column means wealth decrease. 

Rule 3. To make account entry for any business operation 
or transaction : 

I Tlio amount of 

(^) After the account name, write in column A ! ^'•■"I'^'rty obtained 

I or 

•• Debt reduced. 
f Tbe amount of 

(2) After the account name, write in column B i ^'"^'I'l'i'^^' i-e'l"ce<l 

I or 

l^ Debt incurred. 
15 



(3) . If the amount in B exceeds amount in A, place the difference 
in column C (loss). 

(4) If the amount in A exceeds amount in B, place tlie difference 
in column D (gain). 

The above is a formula for all entries. 

Reason. An entry in column A indicates wealth increased ; an 
entry in column B indicates wealth decreased. If, in a given trans- 
action, the wealth increased is greater than the wealth decreased, the 
result is gain, entered in column D ; but if the wealth increased is less 
than the wealth decreased, the result is loss, entered in column C. 

Rule 4. When property is obtained (by purchase, manufacturing, 
growing, or gifts, etc.), entry is made in column A at cost (or estimate 
if cost cannot be found). When the property is reduced (by sale, 
wearing out, loss, destruction, etc.), entry is made in column B also 
on the basis of cost, or book value (the value previously placed in 
column A). 

Reason. By carrying the different kinds of property on the books 
at cost, when property is sold or offered for sale, the owner can see 
from the account how much profit or loss results or would result from 
the sale. One should be very careful to have accounts that can be 
depended upon when it is desirable to know Avhat any article or prod- 
uct costs. 

From the above it is apparent that books kept according to the 
"double-double" entry principle will at all times show the value of 
property, the amount of debt, the amount of loss and the amount of 
gain, and will locate each. 

The reliability of this exhibit depends upon the care with which 
the routine is followed. Without introducing prolonged discussion, 
we would say that if one starts books with only substantial correct- 
ness, the keeping of the accounts will soon develop a perception of 
values that will result in the farm books being as nearly "up-to-the- 
minute ' ' in exhibiting results as the books of a well regulated factory. 

We now turn to typical entries which are designed to cover, or 
rather suggest ways to cover all conditions of entry. Typical entries 
are here treated in Parts Two to Five. 

PART TWO— TYPICAL ENTRIES (Referring to Sales) 

NOTE. Profit is detenuinod only at the time of sale. Imaginary .-rains 
due to fluctuation in prices are not entered in tlie accounts. 

Preliminary: Place the cash balance (ledger account No. 1) in 
journal column 2. Memorandum merely. 

March 2. Sold U. S. Bond #J1209361 for cash, $519.43. Enter 
in journal the day of month and the memorandum as in model form. 

16 



What propoi'ty was obtained or tlel)t reduced? Answer, casli was 
obtained >f?r)l}).4:i ; no debt reduced. Place the amount of cash re- 
ceived in column 1 (A). Placing an amount of cash in column 1 (A) 
is e(|uivalent to placing the amount of any other property in the gen- 
'■ral column A. 

Column 1> Entry. What property was reduced or debt incurred? 
V. S. Bonds were reduced by parting with the bond mentioned. Look- 
ing at the U. S. Bonds account No. 5, you wall see that the book value 
of the bond sold is >|<500.00. Therefore, enter in B as follows: "U. S. 
Bonds "— " 5 ' '— ' ' $500.00. ' ' 

Loss and Gain. If the entry in column A exceeds the entry in 
column B, the result is a gain. If the entry in column 15 exceeds the 
entry in column A, the result is a loss. Find the dillVrence (gain in 
this instance) and place in column D. 

PROOF TO BE REMEMBERED. In any entry correctly made, 
A + C will equal B +D, 

At present, for sake of illustration, please post all entries as soon 
as made. 

Cash Account. The cash entry is in a special column which is a 
monthly cash account so it need not be posted. You should, however, 
add the cash receipt to the previous balance and place the new balance 
in column 2. Hereafter make memorandum of the new^ balance in 
tliis column when cash is received or paid. 

U. S. Bonds Account. Turn to account No. 5 of ledger. The 
entry is sliown in the model. Post journal B item to ledger P> column, 
and the gain to ledger D column. Check to show posting done, 

UKM.VRK. Property rodiued l).v sale is credited at l»o()k value, and the 
difference lii-tweeii IkxiIv value and the anniunt obtained for it is placed in the 
loss or ;,'ain eohunn. Write "sale" in the item space just before the ^ain amount 
to indicate the initure of the ;;ain. Place X marks before the two cancclinu 
entries tn show that the value in Col. .\ is canceled. 

March 3. Sold for cash, 10 shares Pawaiee stock for $826.50. 

Entry. Property obtained: Cash $826.50; Property reduced: 
"Stocks— 6— $890" (book value) ; loss $63.50, column C. Post. Com- 
l^nre -with models, journal and ledger. 

March 4, Sold my note against Joliii (Juild to the hank for cash 
$145. Enter in column 1 (A), cash obtained $145; l>. Notes Receiv- 
able reduc(-d $149.8<); C, Loss $4.80. 

UK.M.MUv. In tlie ledger, if any I! item can be identilled with the i-orre- 
-pondin^ A item. b<itli are canceled by "X" marks. 

Also observe that in tlie led;;er accojuit loss and ^'ain colunnis. a brief com- 
nuMit like "I)i.s." (discount), "Int." (interest), "Sale" (meanin;.; loss or piin on 
th(^ sale), "Taxes," "Hej)." (meaninj; dei)reciation ). and other brief explanations 

17 



are and will he jotted down to explain the nature of the loss or gain. These 
brief explanations may be referred to at any time. They are sometimes con- 
venient in explaining items included in an income tax return. ^ 

March 4. Received from John Carmody $26.71 in full of account. 
Enter cash obtained in column 1 (A) and "John Carmody" (our claim 
against him which is property reduced) "10 — $26.71" in column B. 
There is no loss nor gain. For posting see models. 

REMARK. When a personal account is settled, it is customary to draw 
lines across money columns A and B, thus closing the account. Do not draw- 
lines across columns C and D until the close of the year. 

March 5. Sold Peter Olson on account, 100 bu. corn for $140. 

This is the first entry so far considered that involves no cash re- 
ceived or paid. In entries, always consider first the entry of column 

A. What property is obtained or debt reduced? In this instance 
property is obtained. Our right to collect $140 from Peter Olson is 
property. The account name is "Peter Olson," No. 11 in ledger, and 
the amount in column A. 

Next, what property is reduced or debt incurred? Corn, account 
No. 40, is reduced. How much? Turn to account No. 40 and there 
find that the book value of corn is $1.25 per bushel, or $12^ for 100 
bushels. Place the account name "Corn" on the next line under 
"Peter Olson," the account No. "40" in the account number column, 
and the amount corn is reduced, $125, in column B. 

In this transaction, which is greater, the property obtained (in 
column A) or the property reduced (in column B) ? A is greater than 

B, therefore, the difference is "gain." Place $15 in column D. 

On which line? Opposite the $140, or opposite the $125? Loss 
or gain is always connected with the thing sold, in this instance corn, 
hence place $15 in column D opposite "Corn." The two amounts, 
property reduced $125, and gain, $15, will be posted to Corn account. 
Does the entry balance ; that is, does amount of columns A + C eqiial 
amount of columns B + D ? For posting, see model ledger accounts 
opposite respective ledger pages. 

March 6. Sold Wm. Flynn on his note due July 6, 10 tons clover 
hay at $15 per ton. 

The particulars take two lines for entry, observe the form for 
future similar entries. 

Accounts. A (obtained) "Notes Rec.^8— $150.00" ; B (reduced) 
Hay, 10 tons @ $10.00 (book value) $100; gain $50.00. (See model 
accounts 8 and 41). 

March 7. Sold for cash 1,480 lbs. hogs for $167.60. (Column B, 
Hogs reduced, book value $9.50 per cwt.). See model entries. 

March 8. Made even trade, receiving dairy cow "Cress" in ex- 
change for work horse "Dan." 

18 



Since no money i)assed IuukIs and no value is named, tiie dairy 
cow obtained costs tiie book value of the horse given in exchange. 
This can be found in account No. 91. There is no gain nor loss. Gain 
is determined Avhen things are sold. 

Directions. — This is the first dairy cow on the farm. Open 
"Dairy Cows" account No. 80. 

Then after you have made entry in the journal, post to the ledger. 

Review. The above entries serve to illustrate, (1) that a credit 
entry in a property account is made to annul in part or wholly a pre- 
vious debit entry, (2) that profit is found only at the time of sale of 
property, (3) that to find the profit or loss, the cost (or assumed cost) 
must be already shown on the books. 

The person following these lessons Avill observe that in the ex- 
planatory matter to this point, cost (or estimated value) was consid- 
ered first, followed by sale entries. These two kinds of entries are the 
extremes between which the farm operations will require some en- 
tries in order to keep a record of the cost of things produced for sale, 
and incidentally to keep up the cash collections and payments. 

It is not difficult to see that the main problem ahead is how to 
find the cost. This will be taken up in its proper order. 

Closing the Journal. The journal is closed once a month. For 
the sake of the practice, you may now close the journal on March 10th 
and will close it again on March 20th as though at the end of a month. 

First observe in the special columns 1 (A) and 3 (B) whether any 
cash has been received or paid out. Some cash has been received, but 
none has been paid out. Add column 1 (A) as shown in the form, 
and carry the total to the general column A. Post this total to the 
ledger cash account No. 1. See models. 

Place the difference between columns A and B in the lesser col- 
umn, preceding it by the account name "Wealth Balance, No. 200." 
Place the same amount in the lesser of columns C and D. 

Rule and total the four columns. Columns A and B should be 
equal : so should columns C and D. 

Closing the Ledger. Post the final "Wealth" entry in column B 
to the wealth account in the ledger column B, and the amount in col- 
umn C to the same column of the same account. The ledger is 
"closed." 

Balance Sheet and Income Statement. Take four column paper, 
heading the colunnis A, B, C, and D, and going through all the ac- 
counts, place the totals of each account as instructed to do in nuiking 
model trial balance on page 20 with this additional requirement: 
Place the differences between the totals of columns A and B of each 
ledger account in whichever column is greater, and likewise the dif- 

19 



ferences between C and D of each ledger account in wliiciiever coliinr.i 
is greater. Then rule and total. Column A = column B, and column 
C = column D. If so, all is well. * 

The four column trial balance after closing is the. equivalent of 
what is generally known as a "balance sheet," i. e., columns A and B: 
and what is commonly known as a "Profit and Loss" or "Income" 
statement, columns C and D. 

Balance Sheet and Income Statement, March 10, 19 — . 

A BCD 

1. Cash 2,038.08 

5. U. S. Bonds 1,000.00 19.43 

6. Stocks 5,120.00 63.50 

7. Life Insurance 1,850.00 

8. Notes Receivable . . . 190.00 4.89 
11. Peter Olson 216.20 

40. Corn 1,025.00 15.00 

41. Hay 1,384.00 50.00 

60. Hogs 286.90 27.00 

80. Dairy Cows 120.00 

91. Vfork Horses 455.00 

99. Farm Real Estate. . .43,297.50 

100. Notes Payable 478.34 

101. Mortgage Payable . . 8,000.00 
110. Gage Mercantile Co.. 167.43 

200. Wealth Balance .... 48,336.91 43.04 

56,982768 56,982.68 111^43 111743 

Suggestions and Questions. The person of little experience in 
bookkeeping who has followed the work thus far may have received 
the impression that bookkeeping is a rapid succession of opening ac- 
counts, taking trial balances, entering a few transactions, and again 
taking trial balances and balance sheets. This is not the case. You 
have been hurried through the first circuit of accounting technique 
(by the "double-double") in very short order. The proper per- 
spective is this: The books are opened once in a lifetime. The jour- 
nal, and with it the ledger, are closed once a month. The four column 
trial balance, or balance sheet and income statement, is taken off once 
a month, if desired, or once a year, as a great many will prefer to do. 

But whenever it is taken, you have before you on one sheet : 

Column A, the kinds and book value of your property. 

Column B, the kinds and amounts of your debt. 

Column C, the sources and amounts of your losses. 

Column D, the sources and amounts of your gains. 

20 



This is a statement that will show you or your banker where you 
stand financially. You can fill out your U. S. income tax return in a 
few minutes from column C and I). If all points are not perfectly 
clear to you, the best suggestion the author can make is that you start 
all over at the beginning and write this matter through step by step 
as though for the first time. 

Having thus made an accounting circuit, we shall turn back in tlie 
directions following, and examine the phases of bookkeeping not yet 
sutlticiently dwelt upon ; namely, the dift'erent aspects of entry for cur- 
rent transactions and productive operations. 

SPECIAL BOOKS 

Certain kinds of entries are more conveniently made in a pocket 
memoranda book before being written in the journal. Among such 
records are the check stub entries for checks issued, the entries for 
currency payments, labor time records, and feed records. Such rec- 
ortls are written in the pocket memoranda book wherever one happens 
to be, and transferred therefrom to the journal once a week or once a 
month, as suits the purpose. 

The Check Book contains on tlie stubs a record of deposits, checks 
drawn, and the balance remaining in the bank. The balance shown on 
the stub of tlie check book plus currency on hand at any given time 
should equal the balance carried by memorandum in the journal col- 
umn 2. or if this column is neglected, it should eciual the balance 
shown in the cash account when that account is balanced, usually 
once a month. Opening to your first cheek stub, write in the "bal- 
ance brought forward" $21)1.64. as shown on the proi>erty list at start- 
ing. Since the cash balance now is $2,0)^.08, the difference between 
tlie total cash and the amount shown on cheek stub. $1,746.44, must be 
carried. 

Entry. You will now consider that all money has been deposited 
in the hank except $100 to be carried in pocket. The deposit, $1,646.44, 
should be written on the stub by the one carrying the cheek book, and 
the total eaiM-ied down to the tiiird line. 

The Pocket Cash Payment Book is a lueinorandum book in which 
should be written any payments made in money. The amount of all 
such payments during a month is entered in the jouriuU at the end of 
the month. I>y this means, the snudl paynuuits of a month are placed 
in one entry in the journal. This book has only one money column 
tiiat we shall consider; namely, column "I>," cash "jiaid out" or 
"reduced." 



'n 



PART THREE— TYPICAL ENTRIES (REFERRING TO BUYING, 

CASH, AND BANK) 

Place the cash balance as shown in ledger account No. 1 in column 
2 of journal, leaf 3, above the first writing line. 'See model. Here- 
after, this preliminary should be attended to on the first of every 
month. 

March 11. Enter check No. 40, $127.50, given to John Donner for 
a work horse "Bob," seven years old. 

Check Book: It is assumed that the check book has been in continuous 
use and checks previously issued have been numbered up to No. 39. The check 
for this transaction is written first. First fill the stub. The number "40" is 
written after "No." on check stub and on check form. Then on the stub the 
amount, $127.50, date, to whom given, and for what. Then subtract the amount 
of the check from the total balance shown on the stub, leaving a remainder 
which is carried forward to the "Balance Brot. Forward" space of the next fol- 
lowing stub. 

The check is then filled out and signed; after which it is detached from 
the stub, and the check handed to Mr. Donner. 

Hereafter, in the instructions, when a check is referred to, attend to these 
details before making the entry. By this means the bank balance will be kept 
befoi'e you on the check stub. 

Journal Entry: The entry in the journal is made from the stub. 
Place the amount in column 3 (B), the check number in the column 
immediately following, and the name of the person to whom payable 
directly after the number. Always follow this order in recording 
checks on the journal. Then finish the entry. Reduce the balance in 
column 2. 

March 12. Bought a dairy cow, "Lily," of Wm. Cressy, paying 
$140.00 by check No. 41. 

Same style of entry as on March 11. 

March 13. Issued check to Gage Mercantile Co. for the balance 
due them. See amount in ledger. Rule across personal account col- 
umns A and B when the account is closed. Never rule across loss and 
gain columns until the end of the year. 

March 14. Issued check No. 43 for $304.58 in payment of note, 
face and interest, due today. 

Explanation. — Referring to ledger account of Notes Payable No. 
100, it may be seen that the debt stands (5n the books at $300.00. 

Entry. Column 3 (B) $304.58; column A, $300.00, the difference, 
or $4.58, is entered in column C. The amount $4.58 is interest (loss). 

March 15. Collected cash from P. P. Dahn for face and interest 
of note due today $40.65. 

Entry: Cash obtained is entered in column 1 (A) and the bal- 
ance in column 2 is increased accordingly. The property reduced 
(note surrendered) in column B at the same amount as standing in the 

22 



ledger account. The A column entry less B column entry leave the D 
column entry of 65 cents, the interest (gain) collected on the note. 

March 16. Received cash $100 from Peter Olson on account. 
Enter in columns 1 (A) and B. Post. 

March 16. Deposited $140.65. No journal entry is required. 
Enter on check stub No. 44 and add to bank balance. 

March 17. Enter check to W. B. Bennett for "horse machinery" 
purchased at a sale as itemized in the following list: 

1 Gang Plow for $ 62.50 

1 Walking Plow for 21.00 

1 Disc Harrow 18.00 

1 Farm Wagon 82.00 

1 Corn Planter 58.00 

1 Set Double Harness 48.25 

Total $289.75 

An entry may be nuule as in model journal. "Horse Machinery" 
account Avill be given No. 92. The items can be entered directly in 
the ledger account without listing them in the journal. 

Work horses and horse machinery are carried in separate accounts 
lor review purposes, although the entire loss expenses of both, includ- 
ing feed, repairs, and depreciation, will be distributed to production 
on the basis of horse hours. 

ILLUSTKATIOX. A "liorse bmu" incaiis the work of one horse during' 
one Imur. Thus a sin>;le horse workinjr ei.uht hoiu's wouUl work eijiht hor.«;e 
hours. A team of live horses workinf; eijrht hours wouhl forty horse hours. As- 
suuiiuK that (luring the entire year all horses on the farm work 4,000 horse 
hours, how would one find the cost of one horse hour? Looking at account No. 
91 for the year, it is assumed that the expense (loss) of work horses there 
shown (hu'ing the year may he .$940.00; likewise in account No. 92 it may ai>i)ear 
that the expense (loss* on horse machinery during the year may he .$60.00. mak- 
ing a total expense (loss) on work horses and horse machinery of .$1,000.00. 
l»ivide the exjtense Ity the number of horse hours, and the result is the cost per 
h'>rsf lidur, in this illustration, 25 cents. 

March 18. Bought of A. Wendling & Co.. paying' by check. 400 
lbs. i)r;in («' $1.70 per cwt. 

This i)urchase is for feed supplies. Open account No. 59 "Sup- 
plies Bot" and post this item to that account, showing ([uantity and 
price per cwt. Hereafter charge mill feed, salt, and in fact all pur- 
chased feeds, etc., for animals, as well as oils, grease, etc., for machines, 
to this account. These purcliase.s, when important, should be item- 
ized, for the charges later will be transferred to dairy, horses, hogs, 
machinery, or other accounts in accordance with the use nuule of the 
supplies. 

23 



ILLUSTRATION. The 400 lbs. bran purchased was charged to "Supplies 
Bot" temporarily, or until the bran is either fed or otherwise disposed of. Sup- 
pose that later the feed record shows that 300 lbs. bran was fed to dairy cows, 
and 100 lbs. bran was fed to hogs. An entry would be made in "Supplies Bot" 
account, column B, showing the amount the supplies were reduced, while cor- 
responding entries in the accounts of "Dairy Cows" and "Hogs" would show the 
latter named accounts charged with the bran obtained by them. Likewise the 
intention is that all items charged to "Supplies Bot" eventually will be trans- 
ferred out of this account and charged to the accounts that will show the con- 
sumption of the supplies. 

March 19. Made three sales which you will enter separately as 
directed in previous sales : 

12 tons timothy hay @ $18.00 for cash. 
2 tons timothy hay @ 18.50 to J. Carmody on account. 
• 10 tons clover hay @ 15.00 for cash. 

March 20. Closing the Books. The books may now be closed in 
order to illustrate the added monthly routine connected with the check 
book and the pocket cash book (see form on page 25). 

It is assumed that you have entered money payments (not checks) 
in a pocket cash payment book. The entries made therein are repre- 
sented in the following form, which shows the date, kind, and amount 
of each payment, the total amounting to $82.17. Under the total, 
double lines are drawn to indicate that the book is closed to that point. 

Below the total, the items are analyzed for entry in the journal 
under two general heads, "Living Expense" and "Supplies." The 
items going into "Living Expense" are grouped under two subheads, 
"groceries" and "clothing," since the grocery expense will be con- 
sidered separately in finding the cost of the board of farm hands. In 
like manner the large item "oats" is separated from small miscel- 
laneous items going into supplies. 

Now make a journal entry of all pocket cash expenditures as 
shown in the model journal, and post. 

Explanation. — The property obtained, supplies, is placed in col- 
umn A, and the property reduced, Cash, is placed in column 3 (B). 
The groceries, clothing, etc., obtained are a loss to the business; that 
is, they are regarded as consumed by the owner or his family, as soon 
as they are bought; this is indicated by making a charge to "Living 
Expense." Cash or property lost (to the business or farm) on living 
expenses will be given a separate account, which will normally run on 
the C column only. 

Open account No. 199 headed "Living Expenses," and post the 
amount $46.17 in two items, "groceries" and "clothing," to this 
ledger account in the C (loss) column. 

Also post the items chargeable to "Supplies Bot." 

24 



^^^^^ASH PAYMENTS B 



DATE 



ITEM 




^--^^-g?'— '^^-^^^•^-o^z.-gr 




/I 

20 
2.0 



^^4 



f 



/Co^Jiu^ <g^£:Z^ ^. 



^--"^^-t^^-^Z^^.-^-^^'Z^ 



.^0u.^L.^^U^^^^.c.<L^: .) 



^:^^yL-f^t..'^iZ^<^--<^^ 



- A^. 



-</*^^^-^/^^^^i^ — ^^a:zs 



'^PfuJa^ 



AMOUNT 



/^// 



^^X 



Now ti-aiistVr the special eoluiiin totals: Draw addition lines and 
beneath tliem pjaee the total eolninn 1 (A), the total of 3 (B). 

Proof of ("ash lialance: Add the amount. in column 2 at starting, 
$2,0:58.08. to the total of column 1 (A), $506.65, and from this subtract 
the lotiii of eoluiiin :{ (B) $1,118.23. The remainder should ecfual the 
i)alance as you have it at the end of column 2, or $1,426.50. This is 
done merely as a proof that your cash balance in the memorandum 
eohniin 2 is right. 

Carry the amount of column 1 (A) to column A and the amount 
of column 3 (B) to column B. Post Cash A and B on one line. 

Add all columns and tind dift'ereuce between the totals of columns 

25 



A and B, which phico in the lesser column to be posted to Wealth 
Balance; also find the difference between columns C and D, which 
should be the same as the difference between columns A> and B. If 
found correct, place the amount in the lesser of the columns C and D. 

Rule and total columns A, B, C, D. A should equal B, and C 
should equal D. 

Post Wealth balance to account No. 200. 

REMARK. Adding AVealth together shows that you are now worth 
^48,421.81, and the balance total in column O shows that gains in the various 
accounts have exceeded losses $127.94. 

Balance Sheet. A balance sheet like the one taken on the 10th 
may now be written. 

This balance sheet shows the book value (assumed to be the cost) 
of all property; the amounts of all debts; the losses and gains con- 
nected with the property or debt from which they were derived, and 
the owner's Wealth Balance and Living Expense balances as separate 
items. 

PART FOUR— MISCELLANEOUS ENTRIES 

March 21. (Illustrating income from property). Received cash 
from the following sources: 

Quarterly interest on U.S. Bond #9445126 (Acct. No. 5, col. D) $ 10.6"> 
Dividend 2% on 50 sh. Elec. Ry. Stocks (Acct. No. 6, Col. D) . . 100.00 
From neighbor for hire of our Avork horses, 40 hrs. @ .25 (Acct. 

No. 91, Col. D) 10.00 

Sale of milk (Acct. No. 80, Col. D) 12.40 

Temporary rent of tenant's house to transient, one month, 

(Acct. No. 99, Col. D) 15.00 

(See model entries). 

REMARK. Income derived from property held for interest, dividends, or 
use. is a gain and should be entered In column D. 

March 22. (Illustrating expenses and cost of property). 

Enter check No. 46 for $87.50 payable to Equitable Ins. Co. for 
quarterly premium on life insurance policy #35962. (Acct. No. 7, 
Col. C). 

REMARK. Additions to the value of the policy will be made once a year, 
premium payments in the intervening time will be entered as expenses. 

Enter check payable to Dr. Cleveland, for vaccinating hogs (Acct. 
No. 60, Col. A), $3.40. 

REMARK. This item is here regarded as one of the ordinary costs 
of hog production and is entered in column A as part of the cost of stock raised 
for sale or consumption. 

Enter check payable to Geo. Myers for shoeing horses, (Acct. No. 
91, Col. C), $6.40. 

26 



Enter check payable to the County Treasurer, $245.08, for taxes 
tirst half year on farm, (Acct. No. 99, Col. C), $216.48. 

And for taxes on personal property, (Acet. No. 198. linsiness Ex- 
pense, Col. C), $28.60. 

Enter payment by check to Farmers Insurance Company for in- 
surance on personal property for term of one year to ]\[arch 22, 1921. 
(Acct. No. 198, Col. C), $24.00. 

New Account. Some business expenses, for example, taxes and 
insurance on personal property, cannot conveniently be entered as a 
cost against any given production until later review, or cannot be 
allocated at all. These may be entered when paid, on account No. 198, 
"Business Expen.se," which account now open. Two items in the 
above will be posted to this account, column C. 

March 23. Received cash from Peter Olson in full of account. 

March 24. Sold for cash, 200 bu. corn @ $1.79. 

March 24. Deposited $700. Enter on check stub only. 

March 25. Enter payment to F. C. Reid, contractor, by check 
$69.80 for I'epairs on residence building. Repairs are an expense loss. 

March 26. Enter payment by check to Chandler & Co. for $216.50 
for sinking Avell and installing pump and windmill on farm. 

Permanent improvements (property obtained) are added to tli' 
cost of the property. Improvements are not losses. 

ILLUSTRATION. It is of the {greatest importaiu-e that when a payment 
is made for some Iw-nefit to property, the entry clearly shows whether the thini: 
ohtained for the payment is a permanent addition to tlie pro]>erty (indicated i)y 
plac-inj; the amount in column A, proi>erty obtained i. or whether it is an ex- 
pense iiertaining to the proi)erty (indicated by placing the amount in column C. 
loss). Below are a few common instances that will serve to call attention tn 
this very necessary distinction. 

Imi)rovements (entered in colunni \) : r.nil(iiii.L,' nr making' new wells, new 
f(>iices. new tiles and drains, new l»uildin,i,'s. additions to buildintrs. and the like. 

Expenses (entered in coluuin Ci : Repairs of old well or windmill, repairs 
of fences, of tiles and drains, of linildin.iis. repainting'. repaiierin.L'. refluorini;. re 
shinglins, etc.) 

The distinction is whether an addition has been made of something whieh 
the property previously was entirely without, or whether there have simply been 
repairs or renewals of some part of the i»roi)erty. If an addition, enter the 
amoinit in cnlnnm \\ if a repair, enter the amount in column V. 

March 27. Sold John Carmody, on account, 50 bu. corn @ $1.80. 

March 28. Enter check payable to Globe L. & T. Co. for $120. 
for (|iiai-tfrly interest payment on mortgage. 

March 29. Sold for cash, 50 tons clover hay (ci $14.50. De- 
posited $600. 

March 30. Purchases of groceries from (Jage Mercantile Co. on 
account, this month for private use amount to $49.68. 

27 



After the above transactions are entered and posted, proceed to 
the routine of adjustments for the end of the month dated March 31. 

At this point the totals of the money columns may be written in 
pencil and forwarded to the next leaf as shown in model leaf No. 5. 

Totals of columns 1 (A), A, and C should equal totals of columns 
3 (B), B, and D. So prove before proceeding. 

Pocket Cash Book. It is assumed that this book shows payments 
that are analyzed as follows : 

Groceries and provisions ("Living Expense," Col. C, No. 199) .$ 29.40 
Henry Blair for wages as farm hand ("Labor," Col. C, No. 90) . 60.00 
Material for repairing fences (Farm, Col. C, No. 99) 32.50 



$121.90 

Enter as shown in the form. 

Labor Account. Open and index account No. 90, "Labor," and 
post to column C (loss) the amount of cash paid for labor as shown by 
the pocket cash book. Later the cost of labor not paid for in cash as, 
the board of the hands, or the time of the employer given to farm 
labor, will also be entered in column C of this account. 

The "Labor" account will show in column D the cost of all or any 
part of the labor charge transferred to accounts of the productions 
(such as corn crop, potato crop, dairy, etc.), on which the men worked. 
The transfer from the Labor to the Production account is made on the 
basis of time records showing how many hours each man spent on each 
production, the man hour being considered worth the ascertained cost 
of it as in the case of horse hours before explained. 

ILLUSTRATION. If the entire labor cost of a siven year is $2,040.00 and 
tlie liands, ineliuling employer, worked 3,400 hours during the year, the cost of 
the man hour would be 60 cents ($2,040-=- 3,400 = .60). If the full 3,400 hours 
were reported as being spent on productions, the entire labor charge would l)e 
transferred from the "Labor" account to the production accounts. 

PART FIVE— FARM OPERATIONS 

It is thought that the transactions in Parts One, Two, Three, and 
Four of this problem sufficiently illustrate how the cost and loss or 
profit is posted directly from original entries to the accounts. All the 
illustrations given were confined to transactions, or deals between per- 
sons ; i. e., selling, buying, collecting, paying, etc. 

In Part Five the principal attention is taken from the transactions 
and directed to the farm operations, such as raising produce, growing 
live stock, etc. These operations are not deals between persons, but 
are rather the use or exhaustion of the things on the farm in such a 
way as to obtain new things. The bookkeeping entries to be effective 

28 



in cost finding must bo planned to follow the value from one tliinj^ to 
another in order that the cost of things raised may be as well known 
as the cost of things bought. 

Everything produced on the farm has cost something to i)roduce 
it. The elements of cost going into a given production are so inter- 
woven that one has to reduce these cost elements to book entry by a 
sj'stem which reminds him what to do when he should do it, before he 
is sure that some item has not been overlooked that, if included, would 
sometimes change the totals very much. 

Wiiile a system of finding costs may seem hanler to learn than just 
simply setting down such items as one remembers while they are fresii 
in mind, yet when a system or routine of method is learned, it is easier 
to operate, because one has a plan. He knows when and where to be- 
gin and know^s when he is through. System lines up the facts like a 
row of corn down which a man can plow ; and, when he gets to the end. 
he knows that every hill in that row has been cultivated. Without 
system in bookkeeping, he is continually scratching over the accounts 
in irregular ways, as he would do in a corn field, if, regardless of the 
straight rows, he moved this way and that in search of the hill that 
seemed to need him most. 

There are a few points to be made perfectly cleai- in cost book- 
keeping : 

(1) Value is followed as it moves from one form to another. For 
example, $10.00 value in money today may be spent for corn and thus 
turned into $10.00 value in corn tomorrow', and the $10.00 value in corn 
later may be turned into $10.00 value in a pig; and so on. Bookkeep- 
ing records the transitions. When cash was paid out for corn, we 
make an entry. Corn, $10.00 (Col. A — property, corn, obtained) ; and 
Cash, $10.00 (Col. B — property, cash, reduced). When the corn has 
been fed to the i>ig. we make the entry, Pig, $10.00 (Col. A — property, 
pig, obtained) ; Corn. $10.00 (Col. 1^ — property, corn, reduced). Thus 
the $10.00 value was located first in cash, then in corn, and finally in 
the pig. 

And so on tlirough tin- circuit of farm activities, as in manufactur- 
ing, value is passing from one form into another. The bookkeeping 
entries show where the value goes. This does not imply that a book 
entry is made every time one feeds a horse or a cow, but it does mean 
tiiat a record should be made ol" all things that cost anything of im- 
l)ortanee and that a regular system be emjiloyed to make sure that 
everything about the i)lace that costs value has an account that will 
finally wind up by showing what the thing cost. 

(2) The book value, as learned in Parts One and Two, is tiie cost, 
or the amount invested in the thing. Taking the above example, if 

29 



$10.00 cash is paid for corn, the corn is valued on the books at $10.00, 
the cost, even though the owner might be able to get more for the 
corn. Again, if corn costing $10.00 is fed to a pig, the *added book 
value obtained in the pig is $10.00, the value of the corn, and so stands 
on the books regardless that the pig may have increased in selling 
value more than $10.00. All this is to say that in cost accounting 
every value that passes from one form to another is counted at the 
same value as at first. One part of the farm does not make any money 
from another part by considering the book value of anything produced 
to be more than the cost of the things from which it is derived. 

(3) The profit on any product is found only at the time of sale. 
Thus a horse that cost $150.00 to raise may in the owner's estimation 
be worth on the market $500.00. The book value of the horse stands 
at just what it cost, and remains at that figure until the horse really 
is sold. There is no profit until sale, and there should be no book entry 
of profit until an agreement between buyer and seller fixes a new 
valuation. 

(4) Losses may occur regularly or irregularly which should be 
entered on the books without regard to sale. 

A regular loss is "depreciation," the reduction in the value of 
permanent property through use, wear, tear, growing old, etc. De- 
preciation has received so much consideration by accountants, that a 
normal rate has been established for estimating this loss, as will be 
explained later in this problem. 

Irregular losses, such as accidental destruction of property or 
loss of stock, should be recorded. 

(5) Since profit is regularly determined at time of sale,- the 
accounts showing cost should be expressed in the units sold. Thus, 
if corn is raised to be sold or used, the account showing the cost 
would be an account of corn, not an account of the field that the corn 
grows in. It should be kept clearly in mind that an account showing 
the cost of produce should be an account of the cost of the things 
that are produced in units such as they will be divided into when sold 
or consumed. 

(6) The cost of any farm goods (corn, hay, hogs, sheep, etc.), is 
(a) the cost of any material going into it (example, corn fed to hogs), 
and (b) the cost of a fair share of the expenses of the farm (example, 
the cost of growing a hog would include some labor, some housing 
expense, in fact a fair share of a number of things). 

(7) Observe this important distinction: 

Tlie cost of feed and expenses of animals raised for sale or con- 
sumption and likewise the cost, of seed and expenses of crops are all 

30 



considered a part of the cost of the things produced and are entered 
as "property obtained" (Col. A). 

On the other hand, the cost of feed, care, and otiier expenses of 
maintaining animals kept for use (not for sale), the expenses of 
machinery, such as repairs, and the expenses of the farm land, such 
as taxes, repairs, insurance, etc., are ^lot considered a part of the cost 
of the things, but are trea.ted as an expense pertaining to the things. 
J^uch items are entered in column C as losses. 

In this system, there is a set program of reminders to be con- 
sidered once a month. 

We shall now proceed to allocate (to distribute or assign to loca- 
tions in other accounts than the ones in Avhich they are now standing) 
the items that contribute to the cost of the different farm properties. 

LABOR COST NOT IN CASH 

The ca'sh cost of labor has been consich'red and will be found 
entered in the Labor account. 

The board of farm hands is a labor cost taken out of the owner's 
Living Expense account. The actual labor time of the owner of the 
farm is also an element in the cost of production. The cost of these 
may be determined in the following manner: 

Allow for board of farm hands an equal share, with members of 
the family, of the grocery expense of the mouth. Turning to account 
No. 199, the grocery expense is found to be $104.27. Assuming four 
persons, including the hired hand, the share of the latter would be 
$26.00. 

The labor cost of the hired hand, Henry Blair, is $60.00 wages -!- 
$26.00 board = $86.00 for the month. 

As shown from the work time record, (which will be referred to 
in more detail later), Henry Blair reported 286 hours' labor thi.s 
mouth. $86.00 h- 286 = 30 cents, the hour rate. 

This rate will also be used as a basis for computing the cost of the 
owner's work — forty hours' time reported by him this month. 

REM.VRK. The owner as inaiiiiKer of the farm would l»o entlth'd to hijiher 
hourly pay than a hand. His roconipcnso for uianaj,'enu>nt, however, is in the 
profits, while his manual labor is treated as the work of an avera;;o man. 

On this basis, maki' a journal entry as illustrated in model 

journal. 

Post to No. 197, "Owner's Income from Labor on Farm." 
REMARK. According to rulinR of the U. S. Internal Revenue Department. 

an ini'ome tax return must include as "Income" the owner's time that is charged 

to production. 

31 



FEED AND SUPPLIES USED 

A memorandum record has been kept of feed and supplies used 
during the month. This is illustrated in the form here given: 



FEED, SEED AND SUPPLIES RECORD 



MeA^ 



d-O'-i^'T^^ 



/ Z^J 



2^ 



IJ 



ZvS'o 



^^ / 



%^^T7-yi-^ 



2J' 



i^ 



/ X^i , 



U.'. 



Vr7~_-^->-x-i>^^Z^^'^^ 



/J 



/^ 



■J' 



(L^ 



(Zl-t.^^t^'-^^ 



J^ 



U- 



ct^ 



(^ 



j,^a.^t^/i.£^ — ^S'tCC/^ 



2.0 



■f<^ 



J^ 



.^ 



-'V^^g»--t-<£.g-<i?^ 



f>o 



.JA 



^ 



7?t.<--i-^. 



j^ 



y^'^-'^y-t^^ 



^.'tiL-^.a-,^ 



LiJ 



■=J-a.c^ - .^4-ik^t,^Ht^-»-i-ti6^ 'zJ 



/ S't- 



CO' 



The items in this record must be groupecj under the proper ac- 
count headings in order to have totals of each kind for entry. The 
most convenient means of grouping items from a memorandum record 
is to use a Distribution Sheet. This is a sheet with many money col- 
umns. At the head of the columns are written the account names, 
and under the account names are placed the amounts that should be 
posted to the accounts under which they are written. Thus several 
items to be posted to a given account can be added on the distribu- 
tion sheet and the total posted. 

The form on page 33 should be mastered by the student, for 
it is a general form that can be used ^whenever one has occasion to 
separate and regroup a number of miscellaneous items for posting. 

All operative distributions involve two e((ual lists (1) of property 
obtained or loss, (2) of property reduced or gain. The one list equals 
the other. 

Thus in the distribution sheet illustrated above, the amounts 
under "property obtained or loss" are taken from the column headed 
in a like manner on the feed record, and the amounts under ' ' property 
reduced or gain" are taken from the column headed "Used." 

After the items are entered and the column totals found, the work 
is proved by adding the totals of each part of the distribution sheet 
as shown in the column headed "proof." 

In the journal, 

(1) The total of feed to hogs is entered in column A (property 



32 



-^^^.,^-^^U^U:y (^^^tZ^X^i-.^.^^ frj ^ ^Z^^^^L^^^J 




-^u..^,,^:^.^:^ ( ^) w Jl^-^(:<^ 




obtained), since feed is regarded as an addition to the value ol tiie 
hogs which are being grown for sale or consumption. 

(2) The total of feed to Avork horses and dairy cows is enter-,'d 
in eolunni (' (loss). This is part of the expense of maintaining ani- 
mals kept for use or income. Feed of animals kept for use or income 
is not regarded as adding to their value. 

(3) The corn, timothy, clover, and supplies are taken from prop- 
erty now entered at cost on the books and will be entered at cost in 
journal, column H (property reduced). 

(4) Skim milk is taken at an estimated value from dairy prod- 
uct and is entered as in column T^ (gain) to dairy cows. 

Caution. In this entry, see tiiat columns A + C = cohuuns B + D. 

Po.st. 

DEPRECIATION 

Depreciation is the reduction in the value of pernuuu'ut property 
through wear, exposure to weather, age, and any universally expected 
conditions that cause property to gradually lose value with lapse of 
time. As the accounts are planned in the present ledger, depreciation 

33 



pertains to property represented by accounts numbered 80-99. This 
depreciation may be greater or less annually — according to the care 
taken of the property. It starts with the assumption* that a given 
article, say a corn planter, or a work horse, may be expected to last a 
number of years, say ten years. If the original value is reduced to 
nothing at the end of ten years, it is fair to estimate that the value is 
reduced about one-tenth of that amount in one year. It is a well 
established rule of accounting that entry should be made periodically 
to show the estimated loss on the property through depreciation. De- 
preciation is a part of the cost of raising crops or farm goods of any 
kind. 

The United States Internal Revenue Department, while recogniz- 
ing that depreciation in the same kind of property will differ under 
different care and conditions, takes the ground that the following 
rates of depreciation would appear on the face to be equable. These 
rates are used in this problem. 

If Repairs Are Not If Repairs Are 

Depreciation ou Entered Separately Entered Separately 

Frame Buildings 4% Annually 2V^% Annually 

Brick Buildings 3% "' 2 % 

Work Stock 10% " ■ 

Ordinary Farm Machinery 10% " 

Automobiles -..20-25% " 

Farm Tractor 20-25% " 

The entry for depreciation in the "double-double" books is very 
simple. After determining the amount, enter that amount in col- 
umn B (property reduced) and in column C (loss). Post to the ac- 
count by one-line entry. 

REMARK. Before many years, science will have established a normal rate of 
depletion in soil as the resnlt of ground exhaustion by crops. When such rates 
are established, the entry will be made in the real estate account in the same 
way that depreciation is now made in other permanent property accounts. 

Depreciation is commonly an annual entry to be made December 
31. It would be just as accurate to make 1/12 of the annual charge 
monthly, as is frequently done in factories ; and it will be necessary 
to consider depreciation more frequently than once a year if the costs 
of products sold early in the j^ear are to be ascertained before sale. 

In this problem, depreciation will be computed for March, al- 
though to be strictly within the rules, some extra figuring will be re- 
(|uired by taking into account that much of the property depreciated 
has not been owned a full month. After the amount of depreciation 
is determined for a full month, the same amount would be taken in all 
monthly entries if no changes are made in the property. 

34 



Account No. 80, Dairy Cows. At the assumed rate of lO'/c per 
year, the annual depreciation on dairy cows, book value $260.00, would 
be $26.00, and the annual depreciation entry would be in this amount 
if the animals had been in possession throughout the year. One- 
twelfth of $26.00, or $2.17, would be the monthly entry. Taking into 
account that "Lily" has been owned only 3/5 month, the total de 
preciation charge on dairy cows is safely $1.90 for March. 

The entry is Dairy Cows, column B (property reduced) $1.90; 
column C (loss) $1.90. Enter and post. See model. 

Account No. 91, Work Horses. The annual rate is also lO'/t- Al 
lowing for some changes in the account, the amount of depreciation 
entry for ]\rar('h will be placed at $4.55. 

Account No. 92, Horse Machinery. The machinery has been 
owned about one-half month, for which time, entry of $1.00 is made for 
(iepi-eeiation. 

Account No. 99, Farm. Repairs are already included, the build- 
ings are frame, hence the normal rate is 21/0'/^ annual on buildings and 
imi)rovements only. The value of the buildings, $11,297.50 X .021/^ = 
$282.44, the annual depreciation charge, of -wiiich 1/12 is $23.54. 

This amount, however, must be divided. The depreciation on the 
residence building is to be included in "Living Expense," while the 
dei:)reciation on the general farm buildings (including depreciation on 
improvements, such as fences, tiles, ditches, etc.), is included in the 
cost of production. We shall, therefore, enter the March depreciation 
charge $23.54 in two items : Residence building, $9.38, and general 
farm buildings, $14.16. So enter and post. 

The above entries cover depreciation for March. They show in 
each instance the reduction of property value in column B, and the 
corresponding loss in column C. Depreciation is as truly a loss as 
though the same amount were paid out in cash, and it must be re- 
garded if actual costs are to be found. Prove journal column totals to 
be in balance as before. 

GENERAL OPERATING EXPENSES 

Accounts Xos. 90-99 are accounts of property or labor used in the 
farming operations. The losses connected with these accounts are 
chargeable to crops or other farm products as part of the cost of their 
production. These losses in the present problem consist of (1) labor 
expense, (2) work horse and machinery expense, and (3) farm land 
expense. Each of these losses or expenses must be divided into the 
amounts chargeable to the various productions. The intention is to 
transfer the losses of maintaining the farm land and equipment to the 
things produced for sale as a part of their cost. 

For convenience, the expenses connected with accounts Nos. 

35 



90-99 will be grouped and charged together on one distribution sheet 
as illustrated below. 







«^ «^ 



^ 



'^ 



V\ 



;t 



Work Time Record. It is assumed that the man and horse time 
spent in labor during the month has been entered on the work time 
record. This shows what was done and what account is chargeable. 
The following form gives the items in somewhat condensed form, but 
sufficient for illustration : 



WORK TIME RECORD 



L MAN <■• ■^ n 






^^I'O.A-^^e.itUt^ 



J/ 



-^ 



3o 



Jj>_ 



^2 



^ 



No.Z_ 



PROPERTY OBTAINED 00 LOSS 



d-^^^i..^ 



•—JC-a^ 



/A^/ 



J-i-L 



j£ilA 



"^^-a-y 



--)6yL^, 



A^a 



JLj2. 



CAIJl 



r^-^<:.e^ gy 



i£2^ 



43- 



("Z^-*^^' —JL,^-^J 



/ v/ a^c 



.2!^2Z^=a^^^ 



-it-r'.^t^iLe^ 



^, 






v£^ 



-4- 



(S^tt-^jt-^ 



d^ 



'-^K^^a^-o-t-^t-^l^ 



J-A. 



'Tn.^..^^ 



(2J 



\3->'(, 






^ 



So 



^g? 



The work time record is not filled out completely as here shown 
when first turned' in, but ordinarily contains only the date, emploj'- 
ment, man and horse hours, and possibly the name of the account to 
be charged. After being turned in it is to be completed by writing in 
the amounts of man and horse labor and the accounts to which these 
amounts are chargeable, if they have not been filled in before. 

The Man Hour Rate is found by dividing the total man labor ex- 
pense sliown in aeeount No. 90 by the man labor hours reported. The 
i-esult is the labor cost i)er hour. This may be found on an annual 
basis undei- stable conditions Avhen an entire year is considered, but 
the method will be illustrated here on a month basis. Account No. 
90, Labor, shoM's a cost of $98.00 for the month of March. The work 
time record shows 1^26 hours reported. Dividing $98.00 by .S26 gives 
the rate of HO cents per hour as the cost of man labor under the con- 
ditions of this problem. IJy j)lacing tlie rate at tlie top of the column 
headed "Man," and multij^lying tlie hours reportinl successively by 
"50 cents, we have extended into the amount column the sum of $97.80, 
wiiieii shows that all but 20 cents of the total labor expense for the 
month may be eliiii'g<'(l to the accounts. 

The Horse Hour Rate is found by dividing the net expense or 
loss of account No. 91, Work Horses, and account No; 92, Horse Ma- 
chinery, both of these expenses being distributed through the horse 
hour rate. Referring to these accounts, $66.40 ($65.40 and $1.00) is 
found to l>e the net expense charged. To this add $12.60 charges on 
horses and horse machinery on the work time record, making a total 
charge of $79.00 to be distributed through the horse hour rate. T^ivid- 



ing $79.00 by 488 gives a horse hour rate of 16 cents within a fraction 
of a cent. Using this rate, extend the horse hours on the work time 
record as the man hours were extended. ■* 

After following the method of computing man and horse work 
time and cost, observe that in the column headed "Property obtained 
or loss" appears one new account name, "Field Cost." Before pro- 
ceeding further, read the paragraph explaining this account. 

Field Cost. It is assumed that the farm is divided into fields or 
ground divisions which will here be known b}^ letters as, "Field A," 
"Field B, " etc.; these ground divisions cover the entire farm. 

Before crops are planted, or even before crops are fully decided 
upon, the ground will undergo different kinds of preparation, labor 
and expense, among which may be mentioned hauling fertilizer, plow- 
ing, clearing, paying taxes, etc., — in fact, anything that has to do with 
the costs of the year to be charged against the products of the named 
fields. The cost of these items is entered as a loss of the named field, 
and this loss remains in the account of "Field Cost" against the field 
until the crop is planted, when an account of the crop is opened, and 
the cost of ground preparation, etc., in the area occupied by the crop 
is transferred usually at an acre rate from "Field Cost" to the "Corn 
Crop," "Hay Crop," "Oats Crop," "Potato Crop," etc., accounts. 
In this problem, for the sake of brevity in illustration, it is assumed 
that the farm consists of only three fields, known as A, B, and C. 

Time Record Distributed. In the column of the work time record 
headed "property obtained or loss," there are a number of accounts 
which will be copied in the distribution sheet as shown in the model 
form. Enter distribution on the line opposite the explanation, "Man 
Labor," "Horse Labor," "Taxes," etc. 

These accounts on one side of the distribution sheet are equal in 
total amount to the total of man labor and horse expense, entered on 
the opposite side of the sheet as gain (D). 

REMARK. Man labor, horse expense, land expense, and field cost are 
here entered on the books as losses when paid, and they stand on the books as 
losses until they ar^ distributed to the crop or salable production into which 
they enter as part of the cost (column A). When these expenses are transferred 
to production accoimts, the production account is charged (column A), and the 
C])posite- entry is treated as gain, or more strictly a loss reduced, (column D) of 
the expense account. The "loss reduced" entry serves to annul the previous 
"loss" entry. This is a true reflection in the accounts of what actually takes 
place; namely, that any expenditure for any purpose is a loss until it can be 
identified as part of the cost of producing some salable thing, when it is "prop- 
erty ()l)tained." 

REMARK. The losses on horse machinery are included in tlio amount en- 
tered in Work Horses account as distributed. That is to say, the amount shown 
to be distributed in column D, Work Horses account, should equal the expenses 
of both accounts 91 and 92. 

38 



Land Expense. The net land expense to date is found in account 
No. 91), .^342. 32. There is a slight unusual or accidental income which 
will be disregarded in this distribution. The items should be gone 
ovci' in detail and allocated according to one's careful estimate o^' 
where the expense lies. 

The following will be the distribution in this problem, taking the 
order of entries in the account: 

(a) Taxes— The total tax charge of $216.48 will be distributed 
according to value of property taxed to Field A, $62.00 ; Field B, 
$75.00; Field C, $56.98; Living Expense, $22.50. (The tax on the 
house occupied by the owner as a private residence is classed among 
"Living Expenses"). 

.(b) Repairs — The repair charge on residence building is classed 
as Living Expense. The repairs on farm fields should be charged to 
the fields. In this problem consider $16.00 as chargeable to Field B, 
and $16.50 to Field C. 

(c) Depreciation — The depreciation charge on the residenct- 
building is classed as Living Expense. The depreciation on other 
buildings, drains, tiles, ditches, fences, and improvements should be 
divided among the accounts according to the owner's estimate of tht 
use made of the buildings or improvements. In the present problem, 
divide in equal amounts among Corn, Hay, Hogs, Cows, and Horses, 
giving the odd cent to the last one in order to balance. 

Having completed the distribution sheet, journalize and post. 

RE^IAIIK. The entire losses shown in accounts Nos. 90-99 should he dis- 
trihuted to some final accounts in the course of the year. Before they are so dis- 
tributed the losses there shown stand as a reminder of amounts that should be 
liarjred to the proper production accounts as soon as it is possible to do so. 
riiey are losses of the business as a whole until they are taken into the cost of 
salable products. 

Close the journal as before instructed and see that all posting is 
(lone. 

A balance sheet and profit and loss statement may now be taken 
from the accounts. 

REVIEW QUESTIONS 

With the journal before you answer questions: 

Leaf No. 1. Name the general divisions of property listed in the 
statement at opening the books. 

What was the total amount of property? 

What was the total amount of debt? 

What was the amount of net wealth at opening? 

How many ledger accounts were opened from this statement? 

Leaf No. 2. Explain the use of money columns A, B, C, and D. 
Exi)liiin columns 1 (A) and 3 (B). Explain column 2. In each trans- 

39 



action on this leaf show that amounts in columns A and C equal 
amounts in columns B and D. Why? 

What is done with totals of columns 1 (A) and 3 (B) Avhen the 
journal is closed? 

Explain how increase or decrease in the wealth balance is shown 
when the journal is closed. 

Leaf No. 3. Explain the bank checking account ; the check book ; 
the check stub. Explain entry in journal for a check issued. Explain 
entries for payments out of cash in hand. Where are such payments 
first entered? When are the pocket cash book entries transferred to 
the journal? Why were groceries separated from other items in the 
Living Expense account? 

Leaf No. 4. Explain why the payment of $3.40 was entered in 
Hogs account as property obtained, while a similar payment of .$6.40 
was entered in Work Horses account as loss. 

Explain why on March 24, the sale of a (juantity of corn for 
$358.00 was entered partly in column B and partly in column D. 

Explain why on March 25, an expenditure for repairs was entered 
in the Farm Real Estate account, column C, while on March 26 an ex- 
jjenditure for a well and windmill was entered in column A. 

Leaf No. 5. Explain the journal entry for pocket cash payments. 
Explain the entry in Labor account for board of hired hand and for 
owner's work time. 

Explain the entry for feed and supplies used during the month. 

Explain the entry for depreciation. 

Leaf No. 6. Explain the entry for the March expenses found in 
accounts Nos. 90-99. 

What is a distribution sheet, and how used? 

What special pocket records are recommended in this set? 

AVith ledger before you, answer the following : 

Account No. 1. What was the amount of cash March 31 ? 

(a) How much of this was in the bank? (b) How much in hand? 

No. 5. What was the par value of U. S. Bonds owned? Have any 
gains been derived from U. S. Bonds? 

No. 6. What was the cost of stocks owned? Was there a net 
gain or loss on stocks? 

No. 7. What was the cash value of the life insurance policy? 

No. 8. What was the face amount of notes receivable owned? 
Explain why there is a net loss shown on notes receivable. 

No. 10. How much does John Carmody owe? 

No. 11. What is the condition of the Peter Olson account? 

40 



No. 40. Wliat is the book value, or cost, of the corn now on 
liand? 

Have corn sales resulted in gain? How much" 

No. 41. What is the book value of hay on hand? What was the 
net gain on sales of hay? 

No. 59. Why is the account of supplies in balance? 

No. 60. What is tiie cost of hogs on hand? 

No. 80. Did keeping dairy cows result in a gain or a loss in 
Mareii? 

What is the book value of the cows on March 31 ? 

No. 90. What was the cost of labor in March? How much of this 
cost was distributed at the end of March? Why was not an exact dis- 
tribution made? When will the twenty cents balance of this account 
be distributed ? 

Nos. 91-92. What was the expense loss on Work Horses and Horse 
Machinery? Whj^ are the expenses of these two accounts considered 
one item? 

No. 98. Explain Field Cost account. When will the apparent 
loss shown in this account be distributed to crop accounts? 

No. 99. What was the total amount of losses charged to Farm 
Real Estate? Why were part of the losses charged to production and 
part to living expenses? 

Nos. 100, 101, 110. What is the total of indebtedness? 

Nos. 197, 198, 199. Explain the general loss and gain accounts. 

No. 200. What is the amount of the Wealth Balance on jMarcli 31 ? 

lv\i)lain the general plan of accounts; i. e., Avhat kind of accounts 
would be placed in the division of account numbers 0-39? 40-59? 
60-79 ? 80-89 ? 90-99 ? 

What accounts would be placed in the division 100-199? 

How are accounts in this section further divided? 

INCOME STATEMENT 

With balance sheet and income statement before you. give the net 
gain or loss to date on the following: 

r. S. Bonds, stocks, life insurance policy, notes receivable, corn, 
lia\ . hogs, dairy cows. 

What disposition is to be uuide of the expense losses of accounts 
Nos. 90-99? 

Explain gains or losses in accounts from No. 100 to No. 199. 

41 



TEST EXERCISE 

The April transactions which follow may be written as a test of 
the previous work and a further amplification of the iijstructions or 
suggestions previously given. 

Use loose journal (Form JF) and ledger (Form LF) paper and 

regard the records as a continuation of the records opened in March. 

Bring down the March cash balance to the balance column of a 

loose leaf of cash journal paper. Number this leaf No. 7, and place 

"April" in the space for the name of the month. 

Copy all account numbers and headings on the loose ledger 
sheets (both sides of sheets), using space exclusive of the line for 
heading as follows : Account No. 1^ — 4 lines ; No. 5 — 4 ; No. 6 — 3 ; No. 
7_4; No. 8—6; No. 10—5; No. 11—7; No. 40—11; No. 41—10; No. 
42—6; No. 43— 7; No. 44—7; No. 45—7; No. 46—9; No. 59—6; No. 
60—7 ; No. 61—6 ; No. 80—10 ; No. 90—7 ; No. 91—10 ; No. 92—7 ; No. 
98—7; No. 99—9; No. 100—5; No. 101—4; No. 110—7; No. 111—6; 
No. 197—4; No. 198—4; No. 199—10; No. 200—4. 

In addition to the accounts used in March, you will have seven 
new accounts, w^hicli you will open in their, proper order. They will 
be as follows: No. 42, Corn Crop, 19—; No. 43, Wheat Crop, 19—; 
No. 44, Oats Crop, 19—; No. 45, Alfalfa Crop, 19—; No. 46, Potato 
Crop, 19 — ; No. 61, Growing Cattle; No. Ill, McCormick Seed House. 
Place the date in date column, the word "Forwarded" in the memo- 
randa space, and the March totals of each column of each account in 
their respective columns on the first writing line of the April accounts. 
Accounts that are in balance are not to be forwarded. 

Cost of Growing Stock. It is a good idea to estimate the cost of 
growing stock once a month. In this problem, growing stock is illus- 
trated in the account of hogs. To find the cost of hogs per hundred 
weight, weigh the hogs, and divide the difference between totals of 
columns A and B in the "Hogs" account by the number of hundred 
weight. The result is the cost per hundred Aveight. Place this cost 
in the memoranda column of the Hogs account, and use this cost as a 
basis for calculations of cost in April. On the last day of April, when 
feed and expenses are again entered, the cost will be again brought up 
to date. In this problem, the w^eight of hogs in even hundreds is 43 
cwt. 

COMMENT. The student will consider the accounts now opened as con- 
tinuations of the accounts kept in March, and will necessarily refer back to the 
March entries when items or prices are in question. If loose leaf books were 
used as recommended by the author, each account would have a separate leaf 
and the-incoilvenience of dividing the accounts in this way would be avoided. 

Proceed to enter the April transactions in the same way that you 
entered the March transactions. Refer to the March forms when you 

42 



aro ill doubt about the procedure. No instructions will be given for 
ciitrit's unless a new type of transaction is taken up, 

April 1. Received from John Carinody his U. S. Bond #654392. 
4^4' < . due 1938, face value .^100. 00, which you will accept at the mar- 
ket value, $95.42. This is given in part payment of his account. 
Make entries: U. S. Bonds, Col. A, $100.00, and Col. D, (discount) 
$4.58 ; John Carmody, Col.' B, $95.42. 

Post as entries are made. 

April 2. Sold to Peter Olson, Martelle, Iowa, 150 bu. of corn for 
$270.00. on account. 

Received cash $70.00 from Peter Olson on account. 

Sold to Chris. Bronger for his 25-day note bearing interest at 6% 
from date, 15 tons of timothy @ $18.50. 

April 3. Enter check No. 54 issued to Sherman Feed House for 
50 bu. oats @ $.85 ; 450 lb. bran @ $1.90 per cwt. ; sundry other supply 
items for $9.80. 

Deposited $209.16 (enter on check stub only). 

April 4. Bought at an auction a corn cultivator. Paid for it by 
chock, $37.50, making check payable to James Duncan. 

April 5. You are going to plant crops in all of Field B and pari 
of Field A during the month of April. Field A contains 40 acres and 
Field B contains 60 acres. Field A is divided into three divisions : 
five acres to be planted to potatoes, twenty-five acres to be planted to 
oats, ten acres to be left unplanted this month. Field B will contain 
three crops: thirty acres to be planted to corn, twenty acres to be 
planted to wheat, ten acres to be planted to alfalfa. Enter in your 
ledger accounts after the account titles of "Corn Crop," "Oats Crop," 
etc., the name of the field and the number of acres devoted to the crop. 

Transfer to the crop accounts the proportion of the field cost per- 
taining to each crop, thus: 

Field A — Cost entered in ledger is $86.80 for 40 acres, of which 
five-eighths, or $54.25, will be transferred to the oats crop of twenty- 
five acres, and one-eighth, or $10.85, will be transferred to the potato 
crop of five acres. The remainder of the Field A cost will be trans- 
ferred to the remaining ten acres as soon as the crop is determined. 
The journal entry will be: 

-Vccouiit Xiinip A r. C D 

Oats Crop, 19—, No. 44 .$54.25 

Potato Crop, 19—. No. 46... 10.85 

Field A cost, No. 98 $65.10 

In like manner transfer Field B cost to the crops specified in that 
field. 

43 



Bought on account from the McCormick Seed Co. : 

•3 1/3 bn. alfalfa @ $24.00 (Alfalfa Crop, No. 45) 
30 bu. of Avheat @ 4.20 (Wheat Crop, No, 43) 
60 bu. of oats @ 1.10 (Oats Crop, No. 44) 

Enter in column A, as seed is considered part of the initial cost of 
the crop and not as an expense. 

Enter total amount in column B, McCormick Seed Co. No. 111. 

April 6. Enter check $35.00 payable to Nathan Brown for three 
calves. As you desire to keep account of the cost of these calves till 
you can place them with the dairy cows, open an account for them 
called "Growing Cattle," No. 61, and enter value in column A. 

COMMENT. Natural increase in live stock should also be charged to a 
growing stock account. Calves from the dairy herd should be entered at a suit- 
able valuation, and charged with feed and care thereafter. All such charges 
are made in column A (property obtained), as in the account of "Hogs" pre- 
viously considered. 

April 8. Sell for cash 20 tons of clover hay @ $16.50, and 100 
bu. of corn for $200.00. 

April 9. Discounted Wm. Flynn's note at the Farmers National 
Bank. Cash $147.80 was received after deducting $2.20 discount. 
(Notes Receivable and Interest, column B and column C). 

April 10. Deposited $500.00 in the bank. 

April 11. Bought groceries for $36.80; enter check issued to 
Marco's Grocery in payment. 

April 12. Enter check, $28.50, issued to Wolfe Bros, for clothing. 

April 13. Enter check, $6.75, issued to Wendall & Co. for com- 
mercial fertilizer used on potato crop (column A). 

April 14. Paid Andy Gibbs check, $85.95, for lumber and work 
in building a new chicken house. 

April 15. Cash sales of milk since the first of April amount to 
$10.50. 

Bought a cow "Brownie" from Nick Berlin for $110.00. Gave in 
payment your 30-day note at 6%. 

April 16. Bought of the McCormick Seed Co. on account: 
10 bu. seed corn @ $3.50 (Corn Crop, No. 42) 

50 bu. seed potatoes @ 6.10 (Potato Crop, No. 46) 

April 17. Enter check issued to John Cormier for $75.00 in pay- 
ment for use of pasture land until Sept. 15. Call this pasture land 
"Field D" and place the amount of rent in Field D Cost, column C, 
for the present. 

April 18. Bought on account from Gage Mercantile Co. groceries 
$42.60. 

April 19. H. E. Boyd pays you $12.00 for the use of team and 
gang plow. Place total amount in column D of "Work Horses." 

44 



April 23. I'aitl Dr. Cleveland, veterinarian, by cheek, for atten- 
tion to work horses, $3.50. 

April 24. Sold 1,500 lbs. of hogs for $187.50 cash. 

April 25. Sold 7 tons of prairie hay @ $11.50 for cash, 

April 26. Peter Olson made a payment of $100.00 on acconnt and 
pnrchased 110 bu. of corn for $220.00 on account. (Enter as two 
transactions). 

April 27. Chris. Bronger pays his note of April 2, and interest 
for 25 days. 

April 28. Purchased from Gage Mercantile Co. on account, gro- 
ceries for $25.00. 

April 29. Cash sale of milk from April 15, amounts to $12.80. 
April 30. Cash Payments. Your pocket cash payment book has 
entries which are summarized as follows : 

Repairs for gang plow $ 2.50 

Hired help 75.00 

Clothing 16.80 

Set of double harness 26.50 

Boy for cutting potatoes 3.00 

Hire of work teams 50.00 



$173.80 



Make the same type of entry as you made in your March set for 
this transaction. 

Labor Allowance. Allow for board of farm hand, one-fourth of 
the grocery expense of the month. 

Allow 30 cents per hour for 120 hours' labor reported by the farm 
owner. 

Feed Record. Copy on feed record card in your outfit, compute 
the amounts, distribute on distribution sheet as illustrated on March 
31, and enter in journal the following memoranda of feed and supplies 
used during the month : 



45 



Feed, Seed, and Supplies Record 

Property Obtained 

Used Quan. @ Amt. or Loss Col. 

Corn 45 $1.25 ■ Hogs A 

Corn 30 1.25 Work Horses C 

Corn 6 1.25 Cows C 

Corn 2 1.25 Growing Cattle A 

Hay, Timothy li/. T 12.00 Work Horses C 

Hay, Clover i/o T 10.00 Work Horses C 

Hay, Clover 1 T 10.00 Dairy Cows C 

Hav, Prairie i^ T 8.00 Dairy Cows C 

Supplies, Oats 25 .85 Work Horses C 

Supplies, Oats 5 .85 Hogs A 

Supplies, Bran 1 Cwt 1.90 Work Horses C 

Supplies, Bran 3 C^vt 1.90 Dairy Cows C 

Dairy, Skimmed Milk (est.)... $10.00 Hogs A 

Dairy, Skimmed Milk (est.)... 8.00 Growing Cattle A 

Field D, Pasture 2.50 Work Horses C 

Field D, Pasture 2.50 Dairy Cows C 

Field D, Pasture 2.50 Growing Cattle A 

Depreciation. Compute and enter April depreciation at rates 
used in March on the following value : Dairy Cows, $260.00 for one 

month; Work Horses, $582.50 for one month; Horse Machinery, 
$327.25 for one month ; Eesidence building, same as in March ; other 
farm buildings, $7,014.00 for one month. 

Work Time Record. The following work record for April should 
now be distributed : 

Work Record Summary for April 

Employ- Man Horse Property Obtained 

ment Hours Hours or Loss Col. 

Plowing 60 240 Corn Crop A 

Harrowing 20 80 Corn Crop A 

Planting 15 30 Corn Crop A 

Plowing 10 40 Potato Crop A 

Planting 20 20 Potato Crop A 

Plowing 50 200 Oats Crop A 

Planting 20 40 Oats Crop A 

Plowing 40 160 Wheat Crop A 

Planting 15 30 Wheat Crop A 

Plowing 20 80 Alfalfa Crop A 

Planting 10 20 Alfalfa Crop A 

Delivering 30 60 Hay C 

Delivering 15 30 Corn C 

Delivering 5 10 Hogs C 

Feeding 20 Growing Cattle A 

Feeding 45 Dairy Cows C 

Feeding 20 Work Horses C 

Feeding 20 Hogs C 

Repairs to fences and bldgs., etc . . 25 Farm Real Est. C 

46 



First copy this on a work time record card in your outfit, then 

(1) Divide the total man hours into the balance shown in tlu* 
Labor account to find the hour rate. If the result shows one-half cent 
or more remainder, consider the rate one cent more. 

(2) Extend amounts of man hours at the rate found. 

(3) Divide the total horse hours into the loss balance of Work 
Horses and Horse Machinery accounts plus any losses to be posted to 
those accounts which are shown on the present work time summary. 

(4) Extend the amounts of horse hours at the rate found. 

(5) Transfer the amounts found to a General Operative Distribu- 
tion Sheet as directed at the close of March. 

(6) Find the farm real estate net loss, to which add $7.50 for re- 
pairs (on the work time record), which will be posted to loss. Charge 
the portion on residence to Living Expense and divide the remainder 
among the five accounts as j^ou divided depreciation on general build- 
ings at the close of March. 

Enter on the distribution sheet. 

Closing. Carry cash totals to A and B columns and close the 
journal. See that all items are posted. 

Balance Sheet and Profit and Loss Statement. After posting is 
completed, use a sheet of four-column paper for this purpose. 

REVIEW QUESTIONS 

With cash journal before you, answer the following questions: 

1. In w^hat column do you enter the amount when cash is re- 
ceived? 

2. In what column do you make entry when cash is paid ? 

'.]. Why is it helpful to keep the balance column up to date? 

4. How do you prove that the balance is correct? 

5. Do you make an entry in the cash journal when you deposit 
money in the bank? 

6. How complete should explanation in the "memoranda" col- 
umn be? 

7. What is the value of the memoranda? 

8. Could you enter just the memoranda daily and then enter the 
account names, account numbers, and the amounts once a 
month ? 

9. Would there be any advantages in keeping accounts tiiis way? 
Any disadvantages? 

10. Name as many kinds of property as you can find in the ac- 
count names of the April set. 

11. By what ways could each of these kinds of property be wholl>- 
or partly reduced in value? 

47 



12. In what column would you make an entry to show that such 
a reduction had been made in their value? 

13. Do you understand the purpose of the "Field Co§t" account? 
Explain it. 

15. Do you consider money invested in crops as "property ob- 
tained" or "loss"? Give the reason for your answer. 

15. What proof do you take when you reach the end of a page in 
your cash journal? What is the value of such a proof? 

16. How do you make an entry that there has been a loss or gain 
on a sale? 

17. In what column would you enter the amount of a note pay- 
able when the note is issued? Why? 

18. If any of your live stock died, in what column would you 
make the entry, and what amount would you enter? 

19. To what accounts and in what column Avould the following 
payments be posted : 

Renting a house to live in? 
Renting pasture land for live stock? 
Renting land on which to plant crops? 

20. At the end of each month, what three costs are distributed? 
What is the purpose of this distribution? 

With your ledger before you, answer the following questions: 

1. How often would you ordinarily make entries in your ledger 
cash account? 

2. With what should the balance of your cash account agree? 

3. Would there be any use for the C or D columns in your cash 
account ? 

4. At what value should you always enter bonds? Why? 

5. What explanation regarding a bond should be entered in the 
"memoranda" column of the ledger? 

6. What is the value of placing the cash journal page number in 
the folio column of the ledger? 

7. At what value do you enter stocks? Why? 

8. Are fluctuations in their value entered in your books? 

9. When do you revise the property value of your life insurance 
policy ? 

10. Did you make money or lose money on your notes receivable? 
Why? 

11. When all notes are paid up, how should you indicate this in 
your ledger? 

12. Would you prefer to have your accounts receivable turned 
into notes receivable? Why or why not? 

48 



13. Could there be a loss or gain in an account receivable account? 
If so, how? 

14. if you were offered a few cents more a bushel for your corn 
tiian your original estimated or book value, what other items 
would you have to consider to know whether or not you were 
selling it at a loss? 

15. Under what circumstances would it be advisable to run differ- 
ent kinds of hay in different accounts? 

16. "What do your various crop accounts show at the end of each 
month before harvesting? 

17. IIow do you find the cost per cwt. of any stock grown for sale, 
at the end of each month? 

18. Why should feed for dairy cows be charged as loss, and feed 
for hogs be charged as property obtained? 

19. On April 30, for how much would you have to sell the three 
calves, in order not to lose money on them? 

20. If you decided to sell the calves for nmrket, how would you 
figure to ascertain their cost value per cwt.? 

21. What is the purpose of the Labor account? 

22. How is its total distributed to other accounts? 

23. Why is the board of hired men included in this account? 

24. IIow do you determine the horse hour cost from the Work 
Horses account? 

25. What possible entries could you have for gains in the ''Horse 
Machinery" account? 

26. What is the purpose of the Field Cost account? 

27. AVhen do you transfer amounts from this account to other 
accounts? 

28. Give two entries that might be made in the "I)" eoluinn of 
the Farm Real Estate account. 

29. Wliat information should be given in the memoramla column 
of the Notes Payable and Mortgages Payable accounts? 

30. Why should depreciation on residence be included under 
living expenses? 

31. IIow do you tell what your net gain has been for March and 
April ? 

32. Is there any way that you can prove that your gain is correct .' 
With the feed distribution sheet before you, answer the following 

questions : 

1. From what do you obtain your data for this record? 

2. In which accounts do you post to column A? In which to 
column C? 

3. What feed property has been reduced during the month? 

49 



4. How do you prove that the feed distribution sheet is in 
balance 1 

5. Where do you place the totals found in this she«t? 

"With the expense distribution sheet before you, answer the follow- 
ing questions: 

1. From what record do you obtain data for this sheet? 

2. What three expenses are you distributing among the various 
accounts? 

3. How do you prove the accuracy of your figures? 

With your balance sheet and income statement before you, answer 
the following questions: 

1. How many property accounts have you? 

2. How many debt accounts have you? 

3. By how much does total property exceed total debt ? 

4. What is the Wealth balance at the end of April? 

5. On what items have you actually made money? 

6. On what items have you lost money? 

7. On what item did you make the most money ? 

8. Have dairy cows been kept at a net. gain or loss thus far? 

9. Were the expenses shown in accounts Nos. 90-99 fully distrib- 
uted to productions? 

10. Should expenses shown in accounts Nos. 90-99 be fully distrib- 
uted by the end of the year? 



5(1 



PUBLISHERS' NOTICE 

Journal, ledger, and record sheets together with loose-leaf binders 
for farm bookkeeping are kept in stock by the publishers of this 
course. Description and prices may be found in Circular No. 420, 
which will be mailed to any address on request. Correspondence on 
this subject should be directed to 

GOODYEAR-MARSHALL PUBLISHING COMPANY, 
Cedar Rapids, Iowa. 
Dept. F. 



LIBRARY OF CONGRESS 



002 780 303 9 



